EU running out of time on China MES

There is only one possible solution to the China MES conundrum, argues Bernd Lange.

By Bernd Lange

07 Mar 2016

Thousands of steel workers protesting on the streets of Brussels, a myriad of events on the topic and more legal scholars' opinions than one can count; the question of China's market economy status (MES) is currently one of the hottest topics in EU trade policy.

A decision on whether or not China is a market economy is irrelevant - clearly, it's not. Instead, the debate revolves around whether there is a legal obligation to treat Beijing as such. If this was the case, the EU would have to use Chinese prices as the bases for calculating dumping margins after 11 December 2016.

So far, the prices of so-called 'analogue countries' are used to establish the 'normal value' of a product under investigation. Needless to say, analogue country prices are significantly higher than Chinese prices, allowing the EU to impose higher anti-dumping duties.


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The contradictory situation we find ourselves in can be traced back to the Chinese accession protocol to the WTO. When signed in 2001, it stipulated that a certain paragraph would expire in 15 years' time. The resulting obligations of this expiration are anything but clear cut for those following the current debate.

While some argue that the EU is left with no choice but to treat China as a market economy, others offer alternative interpretations and provide a wider margin of discretion for calculating dumping margins, even after December's deadline.

Since the text is so vague, any decision will be highly political. The answer to what should be is anything but straightforward.

What is certain is that any updates to the EU anti-dumping regulation to reflect changing obligations to China require a fully-fledged co-decision procedure.

This usually takes months as well as extensive negotiations between Parliament and Council. The December deadline is looming and we are quickly running out of valuable time.

What I find astonishing is that the EU has known for nearly 15 years that we would be facing with this decision.

So far, it has done next to nothing about it. It was only after a public outcry and pressure from within the European Parliament that the Commission vowed to conduct and in-depth impact assessment. A public consultation on the topic was recently launched.

While supporting this move from the Commission, the debate between MEPs is far from over. After gaining momentum towards the end of last year, Parliament's international trade committee hosted a workshop with a panel of experts and submitted an oral question to the Commission.

This was followed by a heated debate during the February plenary session in Strasbourg, focussing on the next steps forward.

So what are the alternatives under discussion? Although three options are being considered, I find that only one of them merits further debate.

The first option is to do nothing and use the analogue country methodology beyond December 2016. China would most probably challenge this at the WTO and the EU would likely lose the case. As the champions of a global rules-based trading system, we cannot take this option into serious consideration.

Nor can we expose workers in European industrial sectors, that are already suffering the consequences of dumped products, to an unconditional market economy treatment of China. Our trade defence instruments would not be worthy of the name, and would place thousands of European jobs at risk.

For me and many of my colleagues, this is unacceptable. This brings us to the third option; a way for the EU to comply with its WTO commitments while ensuring our workers are protected from unfair trading practices.

This is the most challenging course of action but is, in my opinion, the only way practical forward. The European Commission has already presented proposals for mitigating or additional measures. This list will need further work and fi ne-tuning to gain support from Parliament.

There are still many questions that need answered. Is it possible to convince the Council not to apply the lesser duty rule in certain cases? Could an alternative method, using analogue country prices, be established?

This could shift the burden of proof to industries claiming damage and use the prices in economies with greater similarities to China than is currently the case.

Will the Commission present a proposal that will go hand-in-hand with a renewed push for the modernisation of our trade defence instruments?

This would undoubtedly find strong support within Parliament. I find it hard to accept that certain member states that are blocking this much needed reform are complaining about the lack of protection of their own industry.

We need to stand united to protect European jobs and ensure that unfair trading practices will not endanger Europe's industry. We must coordinate our approach with WTO partners in similar situations, most notably the US and Canada.

Finally, we need to engage in a constructive dialogue with the Chinese - no one stands to gain from a trade war arising from non-communication.

 

Read the most recent articles written by Bernd Lange - Committee guide 2020 | INTA: Forward-looking and independent