NON-MARKET ECONOMIES (Syllabus: GS Paper 3 – Economy)

News-CRUX-10     9th May 2024        

Context: Vietnam has been pushing the USA to quickly change its “non-market economy” classification to “market economy”, in a bid to avoid high taxes imposed by the US on the goods imported from the Southeastern country.

Non-Market Economies

  • About: Non-market economies are countries where the government plays a significant role in economic activity, often influencing prices and production decisions.
  • Factors: 

o Convertibility of currency.

o Wage determination through free bargaining.

o Permission for foreign investment like joint ventures.

o Ownership of means of production by the state.

o State control over resource allocation, prices, and output decisions.

o Consideration of factors like human rights may also play a role.

  • Anti-Dumping Duties Imposition: The non-market economy label enables the imposition of "anti-dumping" duties by the US on goods imported from designated countries.
  • Dumping in International Trade: Dumping occurs when a country's export prices are deliberately set below domestic prices, potentially harming industries in the importing country.
  • Purpose: Anti-dumping duties aim to compensate for the difference between the export price of imported goods and their normal value.
  • Determining Anti-Dumping Duties: The level of anti-dumping duties is determined by comparing the product's value in a third country, often a market economy like Bangladesh, rather than considering the costs provided by the company from the non-market economy like Vietnam.