Daily Management Review

The EU is ready to recognize China as a market economy


07/21/2016


The European Commission (EC) is developing a plan on recognition China as a market economy, but only if the country’s government abolishes anti-dumping duties and significant reduces excess capacity in the steel industry. This way, Brussels is trying to find a compromise between China’s desire to be equal to developed countries in trade disputes. Besides, the EC’s decision is partly influenced by complaints of European countries and enterprises on the drop in steel prices due to the growth of exports from China.



Status of a market economy is one of the most coveted China's political goals, and the country insists that it can get it automatically at the end of the year according to rules of the World Trade Organization (WTO). Supporters of his recognition, including the UK, claim that this will increase volume of investment between Europe and China. However, other EU countries and the United States fear excessive influx of cheap Chinese imports. The EC tries to find a compromise, because the European anti-dumping legislation is tied to the protocol on China's WTO accession, which expires in December.

According to the plan, which the European Commission planned to discuss on Wednesday, Europe is trying to strengthen its defense in trade disputes. Appropriate measures include Brussels’ ability to introduce high import duties in the event of excessive overproduction of trading partners and to consider preparing anti-dumping proceedings under the old rules.

European producers fear that in the case of recognition of its market economy, China is will would receive a "license for dumping," yet EC is still trying to avoid weakening the anti-dumping protection and toughen punishment. For example, it is assumed that fees restricting directives would be cancelled in case of emergency. "Simply put, it will allow the EU authorities to introduce higher fees in some instances," - said a senior director of Fitch Ratings Peter Archbold. The duties in Europe were below 50%, but higher than 200% in the US, and this is partly contributed to a rise in price of steel on the US market, he said.

The plan also involves acceleration of anti-dumping procedures and tightening of some few penalties currently used for subsidizing production. However, this initiative would meet serious obstacles, both in Europe and in China. Any change in EU legislation must be approved by the bloc and the European Parliament, which adopted a non-binding resolution against granting China with a market economy status. Italy, Spain and several other countries are opposed to this. The opposition is associated with the antiglobalization sentiments, which Western leaders cannot ignore, and complaints of industrial enterprises on their difficult situation because of overproduction in China.

In recent months, Beijing has stepped up a campaign for automatic granting the country with the status of a market economy in December. Last week, European and Chinese leaders agreed to establish a working group to monitor prices and government subsidies given to steelmakers in China. The EC’s plans for the recognition of the country's market economy depends on progress in this direction, but willingness of Beijing to reduce excess capacity still remains in question.

source: ft.com






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