After organising a large demonstration in Brussels last month, an alliance of European workers and industry leaders – representing millions of employees in 30 sectors including steel, aluminium, ceramics, glass and solar panels – is waging a broad-based campaign to persuade the European Union (EU) not to grant “Market Economy Status” to China. The clock is ticking.
The fear is that if the People’s Republic of China gets that status, that comes with lower trade barriers, it will be freer to flood the EU market with even more goods in more industrial sectors at below free-market prices – massive dumping that will run European companies into the ground, and the jobs with them.
The industry alliance called AEGIS Europe mounted a 50,000-strong protest on 15 February in Brussels while the EU was considering its trade policy toward China – its second-largest trading partner after the US – ahead of a key development at the World Trade Organisation.
In December this year, a provision in China’s WTO accession protocol will expire.
That provision currently allows the EU to base its calculations for anti-dumping duties on a market economy country (‘analogue’ country) that is similar to China’s on the basis that China is not a market economy and its costs of production are artificially low due to state influence.
Whether or not the EU decides to grant China Market Economy Status is key in determining the future method to be used to calculate dumping rates in anti-dumping investigations.
The European Commission is currently carrying out an impact assessment and public consultation whilst considering three basic options. The first is not to give China the status, which means not changing EU anti-dumping legislation. Here, the Commission’s view is that there is a “a clear risk that this option could put the EU in breach of WTO obligations and may be challenged, leading to compensation”.
For the other two, the Commission would have to put forward a legal proposal to EU governments and the European Parliament, which has published its own study on the issue. The options are to give China Market Economy Status with or without mitigating measures.
In addition, the Commission has five criteria to determine if China is a market economy, two of which relate to excessive state interference in the private sector.
These have not all been fulfilled but will be part of the Commission’s impact assessment.
During its protest in February, AEGIS Europe produced a European industrial manifesto for free and fair trade. Signatories include the European steel association Eurofer and IndustriAll, a European trade union representing around seven million workers across supply chains in manufacturing, mining and energy sectors.
“China does not uphold the principle of fair competition in its trading relationships. China is not yet a market economy. Therefore, we call on EU leaders to deny Market Economy Status to China until it fulfils its World Trade Organisation obligations,” says the manifesto.
250,000 to 3.5 million jobs at risk, depending on the source
Liina Carr, the Confederal Secretary of the European Trade Union Confederation, comprising national trade unions across Europe, gave Equal Times an analysis of what would happen if China were to be given market economy status.
“Warehouses in China with overproduction are sitting and waiting to flood any market that is open to this production. The unfair competition from the dumped products will lead to hard times for European companies, which will cut back on their own future development and job creation. If European industry starts going bust, there will be direct and indirect job losses,” she said.
The number of job losses is a key political issue here. In a press release, Milan Nitzschke, spokesperson for AEGIS Europe, says “Chinese dumping destroys EU jobs and undermines free and fair trade. Europe cannot afford to put up to 3.5 million jobs and 228 billion euros in lost annual GDP at risk”.
The 3.5 million job figure comes from a study by the Washington-based Economic Policy Institute published last September.
“According to our analysis, an EU decision to unilaterally grant MES to China would put between 1.7 million and 3.5 million EU jobs at risk by curbing the ability to impose tariffs on dumped goods and thus allowing Chinese companies to undercut domestic production by flooding the EU with cheap goods,” says the study.
However, the Commission’s figure is much lower. According to the Commission, there are currently 52 anti-dumping measures in force against China, covering 1.38 per cent of EU imports from that country, mainly in the steel, mechanical engineering, chemicals and ceramics industries. The Commission says that there are currently about 250,000 jobs in industries in the EU directly covered by the measures against dumping from China.
“For our figure, we have taken a more global approach,” Ines Van Lierde, chair of AEGIS Europe, tells Equal Times. “The Commission has calculated jobs at risk based on current anti-dumping investigations and has not taken into account review procedures and cases in the pipeline.
‘’This is the wrong approach. The Commission has not taken into account the potential of China’s dumped products in other sectors,” she says.
There could be a “domino effect with China able to take over whole value chains,” she adds, citing the automobile sector or hi-tech products as areas that could be affected in the future.
Aside from the debate about job losses, Alicia Garcia Herrero, a researcher from the Bruegel think tank in Brussels, believes China will get market economy status in any event.
“I do think market economy status will help China dump more products at below cost prices. harming Europe,’’ she says. ‘’But it is hard to estimate how much it will harm Europe in terms of jobs and competitiveness. In any event, Europe cannot stop this process any more since China will, under WTO provisions, get Market Economy Status with or without the EU.”
She was referring to section 15 of China’s WTO accession protocol, under which other countries can treat China as a non-market economy in anti-dumping proceedings. As from December 2016, a subparagraph of this section relating to the methodology for calculating anti-dumping subsidies will no longer be applicable.
Van Lierde takes a different view: “After that the methodology for calculating anti-dumping measures will need to be changed, but this does not mean that China will be granted market economy status.”
Sources at the Chinese Mission to the EU declined to be quoted directly, but they referred to a speech by the Chinese Ambassador Yang Yanyi to the European Parliament at the end of January:
“We trust in the EU’s political wisdom and look forward to the EU’s timely compliance with the WTO agreement and recognition of China’s MES. Such a constructive move will strengthen an open and reliable bilateral economic environment, boost trade and investment and reduce trade frictions,” said the ambassador in concluding remarks.
The next key moments for debate are a conference with stakeholders in mid-March and a meeting of the College of Commissioners in July.
The Commission’s public consultation on a possible change in the methodology to establish dumping in trade defence investigations regarding China is open until 20 April this year.