European Parliament says China is not a market economy

This week, the European Parliament in Strasbourg debated and adopted a joint motion for a resolution against granting market economy status to China

By Christopher Ball

12 May 2016

Jeanine Hennis-Plasschaert, representing the Netherlands Presidency, began by saying that the question of granting MES to China is one of unprecedented political significance for the EU. This will affect EU trade and jobs and growth. The EU must comply with its WTO obligations, but it must also balance the concerns of its industry and people. The EU is under a lot of pressure to take a decision and the Council will examine the full impact of any decision. The Council thus welcomes the work of the Commission on this. It is important to not lose sight of the potential impact of this decision. She noted the steel situation in this respect which is caused by global over-capacity. The Council has not taken a position as it is waiting for the Commission to produce a proposal. The Council has restarted the discussions on the modernising of TDIs and this might be the moment to look at how to improve TDIs with a view to better tackling unfair trade practices. The recent steel communication is also a welcome initiative.  She noted that the Trade Council will discuss MES on Friday and will also look at the TDI question.

Commissioner Andriukaitis explained that this is a highly important trade issue as is the steel over-capacity question and this is why it is a Commission priority. China is not a market economy by any standard, but this is not the question here. The EU’s TDIs need to be efficient and effective. The Commission has laid out three options:

  1. Do nothing – this would pose a high legal risk for the EU
  2. Remove China from the list of non-market economies and apply the standard dumping methodology – this would present a very high cost in terms of job losses for the EU as the EU would not be able to take into account the distortions in the Chinese economy. This would be untenable.
  3. Change the anti-dumping methodology by introducing a new approach whilst giving effect to the expiry of certain provisions of the protocol. This would reflect the ongoing distortions in the Chinese economy.

There were 5300 responses to the consultation. The Commission also organised a stakeholder conference. The economic study has also been finalised. The impact assessment is ongoing. He noted that it takes time to draw conclusions. The College will discuss the issue before the summer. He then said that the Commission is in close contact with its G7 partners on this question as well. The Commission’s over-riding aim is to maintain a trade defence system that is able to protect the EU against unfair trading practices and over-capacity. He called for the Council to adopt the TDI modernisation package. The Commission is working to help the Council in this regard.

Daniel Caspary (EPP, DE) noted the importance of the strategic relationship with China. But the EU must bolster its TDIs to protect EU jobs. China is not a market economy, but it is still difficult for the EU to react quickly to over-capacity and dumping. The Council does not need to block the TDI proposal. The EU must be able to defend itself better. He called for the EU-China Summit and the G7 Summit to be used to appraise the impact of MES for China. The EPP wants to see real action on this. Please act.

Gianni Pittella (S&D, IT) explained that the S&D is opposed to recognising MES for China as China is not a market economy. This is a simple fact. EU industry is at stake here, as are millions of jobs. China has carried out dumping for years and in the light of this risk, he invoked the precautionary principle. There is no compromise here. Either China fulfils the five criteria for being a market economy or it cannot have MES. The Parliament must send a firm message on this.

Emma McClarkin (ECR, UK) noted that the ECR believes that certain fundamental principles should be considered in this process including the results of the consultation and impact assessment. China contravenes global trade rules and this has led to a dramatic decline of EU industry. If China is to play by the rules, the EU must also do so and this means fully complying with international obligations. The full legal meaning of the protocol that will remain post December must also be clear. Societal impacts must be known before a decision is taken. She then stressed the need for the EU to be able to take action quickly and efficiently against market distorting practices.

Marietje Schaake (ALDE, NL) said that China must be held to its commitment to fair trade practices. She called for the EU to not leave this to the WTO to decide. The EU needs solid TDIs in general and needs to be able to apply anti-dumping measures against China when necessary. She called for EU measures to be WTO compliant. This is not about whether China is a market economy. There is state interference and over-capacity in China. It is impossible to judge whether prices are kept artificially low in China. Importers actually benefit from low Chinese process as well. This should also be taken into account. 

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