Brussels, 12/01/2016 (Agence Europe) - The extremely sensitive issue of the EU granting China market economy status will be the subject of an initial debate in the College of Commissioners on Wednesday 13 January. The issue causes an outcry among certain industries and unions in Europe.
“Tomorrow the College will hold a debate on this request which has been made by China. It is not the time for formal decisions. This will be the opportunity to talk about how the Commission will plan for this request and stage the different procedures that will follow”, Commission spokesperson Margaritis Schenas told press on Tuesday 12 January. “I believe there's a commitment to resolve the issue before the end of the year. This policy debate is not linked to the economic situation and the financial crisis in China”, he added, in response to journalists' questions.
Provided for in its accession protocol to the World Trade Organisation (WTO) that was adopted in 2001, China's trade partners granting it market economy status would theoretically make it more difficult for these partners to launch anti-dumping procedures targeting Chinese exports. Granting this status would significantly change the calculation method used to assess possible sales from Chinese producers at dumping prices, and it would significantly reduce the dumping margins for defining taxes decided upon as part of the use of anti-dumping by China's partner producer countries.
The outlook for the EU granting China market economy status has been causing an outcry from European industry for several months - especially the steel, ceramics, textiles and solar energy sectors. According to a study carried out in September 2015 by the European Policy Institute think tank, the EU granting China market economy status would threaten 1.7 million to 3.5 million jobs in Europe.
On the sidelines of a conference organised by the European Parliament on this issue on Tuesday 12 January, Eurofer (the European steel association) urged European policy-makers to “more rigorously, transparently and comprehensively assess what granting this designation to China would do to the EU's jobs, growth and investment prospects”.
China currently only responds to one of the five criteria set by the EU to define how the country could be considered as a market economy, Eurofer said on Tuesday. “China is simply not yet a market economy. There is still too much state involvement”, it said, accusing Beijing of placing “political pressure” on national and EU policy-makers to prematurely grant it the status of a market economy.
To the verdict of the European Commission's legal service, according to which nothing would oppose granting this status to China automatically at the end of 2016 under its WTO accession protocol, Eurofer counters that this protocol was established under the assumption that China would make enough progress on becoming a market economy - which, in Eurofer's eyes, is not the case.
“Were market economy status to be granted, the anti-dumping measures that safeguard hundreds of thousands of EU jobs against China's unfair competition across a range of strategic EU industries would become ineffective. The EU's other trade defence measures are either inoperative or simply insufficient to defend against the rising tide of dumped Chinese products, particularly steel”, Eurofer warned on Tuesday.
Chinese overcapacity of steel production stands at nearly 400 million tonnes - in other words, over double the EU's steel production (170 million tonnes), and import volumes of Chinese steel to the EU have doubled since mid-2014, with prices collapsing by about 40%, Eurofer adds. It warns of the risk of “already dire” market conditions worsening due to Chinese dumping, and says that granting China market economy status would threaten the entirety of 33,000 jobs in the European steel sector.
“China has no free collective bargaining, and decisions on investment are taken centrally. It is in no way a market economy and should not enjoy the privileges of one”, the ETUC (European trade union confederation) stated on Monday 11 January. “The European Union has clear criteria for market economy status and China clearly does not meet them. What's more, it would open the EU to unlimited dumping of Chinese goods on our market which would be catastrophic for European manufacturing jobs”, said ETUC's secretary general Luca Visentini. The ETUC fears that the Commission wants to grant China market economy status in order to obtain concessions from Beijing as part of the bilateral negotiations for an investment agreement.
Last week, the European association AEGIS, which represents 25 industrial sectors, sent a letter to European Commission President Jean-Claude Juncker warning against the “serious damage” that would result from granting China market economy status.
Faced with this outcry, Juncker is torn between China on the one hand, which is already threatening retaliation if it does not win, and the EU's traditionally pro-free trade member states on the other hand, which are urging Europe to refuse China this status. Juncker will have a very narrow margin for manoeuvre. (Original version in French by Emmanuel Hagry)