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  May 19th, 2016 | Written by

European Parliament: Don’t Recognize China as Market Economy

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  • MEPs say China must fulfill the EU's criteria for market economy status.
  • Until China meets EU market economy criteria, its exports must be treated in a non-standard way.
  • The EU's scheme on Chinese imports must comply with international obligations in the World Trade Organization.

Up to the end of 2016, China’s exports to the EU can be subject to special tariffs to protect EU industry from dumped or subsidized imports, according to World Trade Organization agreements.

But members of the European Parliament say that until China has fulfilled the European Union’s five criteria for market economy status, its exports to the EU must be treated in a non-standard way. This non-standard methodology, for use in anti-dumping and anti-subsidy investigations, should assess whether China’s costs and prices are market-based, so as to ensure a level playing field for EU industry and defend EU jobs, according to a non-legislative resolution passed by the European Parliament last week.

The EU must to find a way to do enact this scheme in compliance with its international obligations in the World Trade Organization (WTO), and in particular China’s WTO Accession Protocol, which provides for changes in how China is to be treated after December 11, 2016. In a resolution passed by 546 votes to 28, with 77 abstentions, members of the European Parliament (MEPs) call on the EU Commission to come forward with a proposal that strikes a balance between these needs.

MEPs urge Commission to listen to the concerns of EU industry, trade unions and stakeholders, about the possible consequences for jobs, the environment and economic growth in the EU. China’s excess production capacity and the resulting cut-price exports are already having “strong social, economic and environmental consequences in the EU”, their resolution noted, pointing in particular to the EU steel sector.

The MEPs pointed out that 56 of the EU’s current 73 anti-dumping measures apply to imports from China.

The MEPs nonetheless stress “the importance of the EU partnership with China”. China is the EU’s second biggest trading partner and with daily trade flows of over €1 billion, the Chinese market “has been the main engine of profitability for a number of EU industries and brands”, they say.

The MEPs strongly “oppose unilateral concession of market economy status to China”, but instead ask the Commission to coordinate with other major trading partners to come to a joint interpretation of WTO law. They also urge it to use the upcoming G7 and G20 summits, as well as the EU-China Summit, to find a WTO-compatible response.

The MEPs stressed the “imminent need” for a general reform of EU trade defense instruments, and call on the Council to unblock a package of proposals to modernize them on which Parliament voted its position in 2014.

In a recent debate on how to deal with Chinese imports after December 11, 2016, EU Commissioner Vytenis Andriukaitis told MEPs that the commission is working on a new set of rules that will include a strong trade defense system and ensure compliance with WTO rules, and that it would debate this “before the summer recess”.