With a number of U.S.-China trade disputes simmering, this criticism from Trump seemed designed to justify his various tariff threats, on steel, aluminum and a wide range of other products.
Like many of Trump’s policy pronouncements, this one was clumsily framed and misleading, but had a grain of truth to it. If China is dominating the international economy, as you might conclude from headlines, why is it classified as “developing” and why does it get special treatment?
The answer is fairly simple: When China began the process of joining the WTO in 1986, it was, in fact, quite poor. Its GDP per capita, taking into account purchasing power parity (PPP), was around $677, compared to $19,078 for the United States. However, the critics are right that China’s economy has grown substantially in recent years, and it is now time for China to become a more equal partner in international economic affairs.
There is no official WTO classification as to which countries are “developing.” This status is self‐selected, based on politics more than law or economics, and can be contested. It is a controversial point that usually stays buried beneath the surface, but occasionally flares up into minor controversy.
By declaring itself a developing country as part of the negotiations, China was able to take on fewer commitments at the WTO. However, 17 years into its WTO membership, China has surged to become the second largest economy in the world. Parts of China are now as advanced as parts of the industrialized world.
At the same time, before you assume that China has now “graduated” to rich country status, keep in mind that not all Chinese are doing so well. National Economic Council Director Larry Kudlow recently said, “China is a first‐world economy, behaving like a third‐world economy,” but that is an exaggeration.
China’s GDP per capita, measured with PPP, was $16,660 in 2017. That is a vast improvement over where it was in 1986, or in 2001 when it joined the WTO, but it is still much lower than the United States ($59,501).
This low figure for average wealth, despite high incomes in some big cities, is the result of substantial income inequality in China. And as a result, China can still call itself “developing” in the context of the WTO.