China’s Market Status Dilemma: New EU Plans Ahead

Written by | Friday, July 22nd, 2016

The European Union said on Wednesday (20 July) that it would put an end to the discussions on whether China has a market economy but instead it will focus on the introduction of new measures designed to tackle Chinese dumping and illegal subsidies. Moreover, Brussels is planning to treat China as a market economy in trade disputes but only when accompanied by US-style anti-dumping duties and substantial cuts to China’s steel overproduction.

Under the rules of the World Trade Organization (WTO), China can be treated as a non-market economy in anti-dumping proceedings unless Chinese companies can prove that they operate under market economy conditions. Because it is often difficult to determine the nominal values of Chinese goods, methodologies under the non-market economy conditions usually calculate the value leading to higher anti-dumping duties. Therefore, it has been one of China’s major foreign policy objectives to get rid of the label of a non-market economy since 2001 when it joined the WTO and was promised the status by the end of 2016. This is, however, blocked by the block of 28 EU members who have been involved in a number of disputes ranging from steel to solar panels.

The Commission essentially said on Wednesday that the EU would have to commit to its WTO obligations regarding China’s membership but at the same time it would push for a “a strong trade defense system”. EU Commissioner for Jobs, Growth and Investment and Competitiveness Jyrki Katainen told reporters that “we should forget this phrase” when asked if that meant granting market economy status to China. Mr Katainen said that “it is better to forget this concept because our [EU’s] approach is entirely different” and emphasized that EU’s new proposals make sure that European companies will be protected. EU Trade Commissioner Cecilia Malmström added that the new proposals will be presented later this year and they will be “country neutral… this new methodology will lead to roughly the same level (of protection) as today”.

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