Bipartisan Bill to Properly Label China a Developed Nation in International Organizations Introduced in the Senate and Shows Congress Wants to Take Real Steps to Counter China Wherever it Can
In February, Sens. Mitt Romney (R-Utah) and Chris Van Hollen (D-Md.) introduced the “Ending China’s Developing Nation Status Act.” The legislation would prevent the granting of “developing nation” status to China in future treaty negotiations as well as require the Secretary of State to pursue changing China’s status as a developing nation in international organizations where such procedure exists. Sen. Romney introduced this bill in the last Congress, but it did not go anywhere.
Each country can choose to be called a “developing nation” in organizations, but other countries are allowed to challenge that status. For example, since China joined the World Trade Organization (WTO) in 2001, it has continued to insist that it is a developing country and has the right to avail itself of flexibilities under WTO rules. These advantages include increased non-reciprocal access to foreign markets, enhanced safeguards for their trading interests, and more time to implement tariff reductions.
The Trump administration released a memo in 2019 that required the United States Trade Representative (USTR) to push for reforms at the WTO in order to change how countries claim “developing nation” status. Those that claimed developing nation status, despite economic indicators to the contrary, would be prevented from taking advantage of benefits afforded to truly developing nations.
These are examples of where China claiming “developing nation” status doesn’t hold up to even light scrutiny:
- China is the second-largest economy in the world in terms of GDP.
- China has the world’s second-largest defense budget, behind the United States. In 2021, China’s defense budget was $270 billion.
- China was the third most popular destination for foreign direct investment in 2021, according to the International Monetary Fund (IMF). China is in the top 10 for outbound foreign direct investment in 2021 as well.
- As of 2020, the Chinese state and state-controlled entities have lent about $1.5 trillion in direct loans and trade credits to more than 150 countries. That lending has made China the world’s largest official creditor, surpassing official lenders such as the World Bank, the IMF, and all OECD creditor governments combined. China’s overseas lending boom is unique in comparison to capital outflows from the United States or Europe, which are largely privately driven.
- As of 2018, more than half of the Chinese population had entered the middle class.
- As of 2019, China accounted for nearly 13 percent of total global exports of goods, while its global share of such exports jumped five-fold between 1995 and 2017.
- China has been the largest global exporter of goods each year since 2009. As of 2019, it ranked first in the world for exports of high-technology products, with such exports increasing by 3,800 percent between 1995 and 2016. China is also the second largest importer in the world, behind only the United States.
Why This Matters
The United States has consistently opposed China’s claim as a “developing nation” in various international organizations. Requiring the Secretary of State and others to actively push for changing China’s designation from a “developing” to a “developed” nation would ensure that China is held to the same international trade commitments and practices as other developed nations.