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27/09/2016

De Jonquières: China could retaliate for not receiving market economy status

Trade & Society

De Jonquières: China could retaliate for not receiving market economy status

Guy de Jonquières

[Borderlex]

In 2016, the EU will need to start pairing back the ‘non-market economy’ treatment it offers Chinese firms. The US ?is pressing the EU not to grant China Market Econony Status (MES) automatically, says Guy de Jonquières.

Guy de Jonquières was interviewed by Borderlex.

De Jonquières is a Senior Fellow at the European Centre for International Political Economy in Brussels. He is a former Financial Times journalist, focused on China and trade policy,

Is China a market economy? Does this issue have anything to do with the EU’s WTO commitments?

There is no simple yes/no answer to the first question. WTO rules stipulate that it is for exporters to satisfy importing countries that they operate in a market economy, as defined by the laws and rules of each importing country. A number of other WTO members already confer Market Economy Status (MES) on China, but the US and EU at present do not.

Is there a need for a coordinated view with Washington? Is the US government’s view on China MES the right one?

The Obama Administration ?is pressing the EU not to grant China MES automatically at the end of this year, so it apparently thinks a common US-EU position? is desirable – presumably on the grounds that it ?c?ould increase pressure on Beijing.

What happens if the EU, and the West more broadly, do not grant China market economy status treatment in 2016?

China insists that WTO rules require that all other members grant it MES automatically? at the end of this year and has threatened to react strongly if they do not. Beijing would be very likely to bring a WTO disputes case against the US and EU if they continued to withhold MES after that date. It might also seek to retaliate against their exports, most probably by launching anti-dumping and subsidies investigations against them and possibly by taking actions against the subsidiaries of American and European companies operating in China.

How the WTO disputes panels would decide if China did bring a case – which could take as long as three years to adjudicate – can only be guessed. The only certainties are that it would all amount to a field day for trade lawyers, and would risk adding to friction in US and EU trade relations with China.