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EU delays decision on China market economy status

14 January 2016, 14:39 CET
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EU delays decision on China market economy status

steel - Photo by Deutsche Phototek

(BRUSSELS) - The EU on Wednesday said it would wait until later this year to decide if China should finally be considered a real market economy, a status keenly sought by Beijing that would make it harder for Europe to limit its cheap exports.

China, the world's manufacturing powerhouse, but where the state still plays a huge role in running the economy, wants the designation from the European Union as it campaigns to win over the 162-country World Trade Organization.

"We will come back to it later because the (Commission) president very clearly concluded that this issue has to be looked at from all important angles given the subject's importance for international trade, but also for the EU's economy," European Commission vice-president Frans Timmermans said after a special debate on the issue.

The question should be put back on the table sometime in the second half of 2016, he added.

Crucially, winning market economy status would allow China to use its own calculations when fighting off accusations lodged at the WTO that it dumps cheap exports onto the world market at far below domestic prices.

There are currently 52 anti-dumping measures in force against China in the EU, mainly covering key industries steel, mechanical engineering, chemicals and ceramics, according to EU data.

They would all be in jeopardy if the status change for China goes through.

Brussels is caught in a bind between satisfying its second biggest trade partner and the world's emerging superpower, and taking a step that would make it more difficult for member countries to use tariffs to protect their domestic businesses.

Beijing, furiously fighting a slowing domestic economy, is pushing to win the status change after being denied it repeatedly since joining the WTO in 2001.

China was given 15 years to come up to scratch and allow market forces free rein in what is still nominally a Communist country.

Beijing says that WTO statutes mean that it should automatically get the change at the end of the year and the EU is trying to determine whether it will agree.

"There is no automatic decision in favour of China," a European source told AFP, adding that the matter would be approached carefully.

European manufacturers across the board insist on maintaining the status quo, a stance supported by the United States and Canada.

The Washington-based Economic Policy Institute (EPI) projects that if market economy status were to be granted, EU economic output could be reduced by nearly two percent a year, with millions of jobs lost.

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