Brussels, 30/05/2007 (Agence Europe) - Last week, the Commission presented a report on progress made by China towards market economy status to Committee 133, composed of trade experts from EU member countries. According to a diplomatic source cited by Reuters, the Commission stresses in its report that “proper implementation of these new pieces of legislation should contribute significantly to resolving a number of outstanding issues and will help create the necessary conditions for market economy (status)”. According to the same source, some member states - especially France and Italy that head the countries in favour of trade defence against unfair Chinese practices - are on the alert. Paris and Rome, which reproach the Commission for not being sufficiently tough towards Beijing and for adopting an attitude that is even less firm than that of the United States concerning respect of intellectual property rights in China (the Union is only the third party to the US complaint, EUROPE 9418), and which want extension of the voluntary agreement governing quotas on Chinese textile exports to expire end 2007 (EUROPE 9411), fear that, by granting China market economy status too rapidly, this would be to the detriment of their producers' interests. Granting this status would allow Chinese exporters to more easily defend themselves against Community trade retaliation measures after accusations of dumping. Without a status, the Union can refuse production costs put forward by Beijing for its products and establish a penalty on the basis of figures from other development countries where costs are higher.
At this stage, Beijing has only met one of the five criteria for obtaining market economy status: - the absence of state-induced distortions in the operation of enterprises linked to privatisation (i.e. “carry over” from the old system), and the absence of use of non-market trading or compensation systems (such as barter trade). When it comes to the other criteria - government influence (price fixing, tax discrimination, trade or currency regimes), existence and implementation of a transparent and non-discriminatory company law, property rights, a functioning bankruptcy regime and a financial sector that operates independently from the state - then there is much still to be done. This question should be the focus of discussions on 12 June in Brussels between Trade Commissioner Peter Mandelson and his Chinese counterpart, Bo Xilai. (eh)