October 1, 2009
Vietnam may soon get market-economy status
NEW DELHI: India is all set to recognise Vietnam as a market economy—a system where prices of goods are determined in the market and not by the government.
NEW DELHI: India is all set to recognise Vietnam as a market economy—a system where prices of goods are determined in the market and not by the government.
This clears the last hurdle in the way of India’s free trade agreement (FTA) with all Asean members. A Cabinet note on the issue circulated by the
It is now ready to be submitted to the Union Cabinet for its approval.
“We are hopeful that we will be able to submit the note to the Cabinet by this week and it will be approved soon. Once that happens, the India-Asean FTA will be complete and include all 10 Asean countries,” the official said.
The FTA, which was signed between India and all Asean countries except Vietnam earlier this year, is scheduled to be implemented from January 1, 2010. Vietnam had said it would be party to the agreement only if India gives it market-economy status.
Once Vietnam is given this status, India will have to accept prices supplied by it in all anti-dumping investigations against goods originating from that country. Anti-dumping investigations happen when a country suspects that the exporting country is selling goods at a price lower than the domestic prices prevailing in its local market.
Once Vietnam is given this status, India will have to accept prices supplied by it in all anti-dumping investigations against goods originating from that country. Anti-dumping investigations happen when a country suspects that the exporting country is selling goods at a price lower than the domestic prices prevailing in its local market.
If the domestic prices are found to be lower than export prices, then the importing countries can impose additional duties equivalent to the dumping margin. At present, India uses third-country prices for calculating dumping margins against imports from Vietnam.
What is a Market Economy
In a free market economy, the ‘invisible hand’ of supply-and-demand market forces defines what is produced, in what quantity, and at what price.
A market economy is a type of economic system in which the trading and exchange of goods, services and information takes place in a free market. A market economy may therefore also be known as a free market economy.
The phrase is typically applied to countries or administrative regions that follow this approach.
Since free markets are governed by the law of supply and demand, the market itself will determine the price of goods and services, and this information will be made available to all participants. Businesses can decide which goods to produce and in what quantity, and consumers and businesses can decide what they want to purchase and at what price.
The opposite of a market economy is a planned economy, where the government decides what to produce, in what quantity, and to be sold at what price.
Mixed economies blend market and planned economies, meaning that the government will have some role in regulating the market, but all other activity will be driven by the decisions of buyers and sellers. Since the government will always have some level of regulatory control, no country operates as a free market in the strict sense of the word, but we generally say that market economies are those in which governments attempt to intervene as little as possible, while mixed economies include elements of both capitalism and socialism.
The main characteristics of a market economy are its flexibility and decentralized nature. This type of economic system is more apt to cope up with ever-changing market trends, making it faster and more reactive. The role of the national and state governments in the market economy is debatable, although it has been found that government interventions are sometimes necessary.
In these cases, the government mainly deals with the formation and implementation of rules and regulations and ensures that monopolistic behavior does not obstruct competition in the marketplace. Regardless of the government’s role, decisions made in a free market economy are primarily made by the ‘invisible hand’ of market forces – and not mandates issued by the government.
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