World Economy

Changing China’s Status Would Impact EU Economy

Changing China’s Status Would Impact EU EconomyChanging China’s Status Would Impact EU Economy

Treating China as an economy driven by the market, not by the state, would have an impact on Europe’s economic output, the European Commission said in a statement on Wednesday following a discussion among commissioners in Brussels.

“A change in the status of the Chinese economy under the EU anti-dumping rules would also change the methodology of calculating anti-dumping duties which, in turn, would have an impact on the European economy,” Reuters quoted the statement as saying.

The commission said it would consult closely with other trade partners on its decision, such as the United States, as well as European industry.

The European Commission will discuss Beijing’s demand that trade barriers against it be relaxed, opening a politically charged debate on Wednesday that will shape future ties with China.

The European Union’s 28 commissioners discussed for the first time the issue of granting China “market economy status” from December, which Beijing says is its right 15 years after it joined the World Trade Organization.

That status would make it harder for Europe to impose anti-dumping duties on Chinese goods sold at knock-down prices, changing the criteria for determining a fair price.

“This issue has to be looked at from all important angles given the subject’s importance for international trade and also for the EU’s economy,” commission vice president, Frans Timmermans, said after the commissioners’ meeting.

“If there are measures to be taken related to this issue then, of course, these individual measures will have to be assessed for impact. Those are the rules, but I can’t say yet what those measures will be.”

  Second to US

In a statement, the commission said any decision would have an impact on the European economy but gave no details. The EU is China’s biggest trade partner, and China is second only to the United States for the EU. Chinese imports to the EU were worth €302 billion ($330 billion) in 2014, more than triple their level at the start of the century.

The EU executive, which handles trade issues on behalf of EU governments, said it would fully involve European industry and liaise closely with its biggest trade partners on the issue, acknowledging this would take some time.

The bloc is now in a third year of talks with the United States on a free-trade deal and Washington has indicated it sees no need to change its relationship with China.

  Job Losses

The bloc’s decision will be taken with EU governments and the European Parliament. Officials have told Reuters one compromise might be to agree temporary protection against cheaper Chinese exports to protect EU industry.

The steel industry in particular has been a fierce opponent of any loosening of trade barriers against China. The industry association Eurofer, which has lodged a series of complaints against China, said Chinese steel production over capacity was some 400 million tons, more than twice the total EU steel production of 170 million tons.

Chinese steel imports to the EU have doubled in the past 18 months, with prices falling by 40%, it said.

Aegis Europe, a group of about 30 European manufacturing sectors, including metals, chemicals, ceramics and textiles, said Beijing’s aggressively export-led economy encouraged its enterprises to dump on foreign markets.

Granting market economy status to China would have a huge negative impact on European industry, it said, citing a study saying that to do so would put 1.7 million to 3.5 million European jobs at risk.