During the last couple of weeks, the discussion about whether or not to grant China market mconomy status (MES) has intensified. Political, legal and technical arguments, are coming in from left to right, writes Christofer Fjellner.
Christofer Fjellner is Vice Coordinator in the Committee on International Trade for the EPP Group.
To be frank, this issue is a bit of a mess. Market economy status for China is going to happen, whether we like it or not. The real question is when it will happen, and how much pain we’ll endure in the process.
According to a widely-circulated study made by the Economic Policy Institute, the pain of granting China market economy status will be immense. The study contends that the EU could lose up to 3.5 million jobs if the EU were to recognise China as a market economy. The words ‘3.5 million lost jobs’ probably sends shivers down most people’s spines, but the sheer magnitude of the number ought to raise more question marks than exclamation marks.
Let us slow down. What are we talking about? We are talking about an obligation to remove a subparagraph in China’s WTO accession protocol. In December 2001, when WTO members agreed on China’s accession, a particular methodology for calculating dumping margins, commonly called the ‘analogue country method’, was agreed to be abolished after 15 years of membership. In December 2016, that date will come.
The person who came up with idea to call this process “the granting of China’s market economy status” might either have been a clever public relations strategist, or a terrible one, but missed the point by miles, because China is not a market economy, and will not be one in the foreseeable future. Fulfilling market economy conditions is not what the discussion is about. It is about a legal obligation to comply with a WTO accession protocol.
How can a removed sub-paragraph in a country’s WTO accession treaty cause 3.5 million workers to lose their jobs? Well, the short answer is that it cannot. It is against common sense that just because the EU changes its methods to calculate dumping margins in anti-dumping investigations, all workers in, and around, the European ceramics, steel, paper and aluminium sectors will suddenly lose their jobs, ignoring the jobs that might be lost if we do not comply with the WTO accession protocol. I would call such calculations “tunnel vision economics”.
Tunnel vision economics, looking at one specific effect of one specific action, is by definition scary. But it rarely portrays reality, because the reality is that high anti-dumping duties against China will still be possible, although it might be more difficult, regardless of the EU granting China market economy status.
But that is not the issue here. The issue here is what else will happen if we do not grant China something to which they have a legal right. The simple answer is: retaliation. However much I despise retaliation and tit-for-tat trade policy, and wish to avoid it, I know it is a reality. It is certainly a reality in a trade policy area which is so heavily politicised.
So let us try to come back to what the issue is really about. It is about amending the calculation method of anti-dumping duties, not about the abolition of the EU’s anti-dumping duties, or the dismantling of the EU industry. This is about ensuring rules-based trade, about ensuring WTO compatibility, something that has served both the EU and China well.