China dubs European Parliament vote against market status ‘unconstructive’

Handshake between Wang Yi, Chinese Minister for Foreign Affairs, on the right, and Federica Mogherini, 2 July 2015 in Vienna. [Commission]

A European Parliament vote against granting China market economy status in the World Trade Organization was “not at all constructive”, Beijing’s foreign minister said yesterday (16 May) as he met his French counterpart.

The designation would make it much harder for Brussels to fight Beijing over alleged unfair trading practices.

China joined the WTO in 2001. It argues that accession protocols dictate that it will automatically switch over to market economy status by this December, 15 years later.

But European lawmakers in Strasbourg last week voted overwhelmingly against issuing the designation, concerned that doing so would cost Europe job losses in key industries such as steel.

EU lawmakers reject granting China the market economy status

MEPs voted on Thursday (12 May) against granting China the status of ‘market economy’, pre-empting the proposal being prepared by the European Commission.

“We believe that this European Parliament decision was not at all constructive,” Chinese Foreign Minister Wang Yi said at a joint press conference with his visiting French counterpart Jean-Marc Ayrault.

Wang urged the EU to take an “objective look” at the issue and respect WTO rules.

“As a member of the WTO, the EU must fulfil its promises and not deny or avoid the issue,” he said, adding: “China’s wish is clear, simple and reasonable: that everyone should remember the commitments they have made.”

China is the world’s second-largest economy and the EU’s second-largest trading partner, with daily trade flows of over $1 billion (0.8 billion euros).

It is also the world’s top steelmaker, producing more than half of global output, and has been accused of flooding the world market with oversupply sold at below cost in violation of global trade rules.

The industry is under state control, and government policy often plays a more important role in business decisions than market factors.

Chinese steel output hit a record 70.65 million tons in March, according to data from China’s National Bureau of Statistics. The industry is suffering a massive overcapacity problem.

In the non-binding resolution, MEPs urged that Chinese exports be treated in a “non-standard way” so as to “ensure a level playing field for EU industry and defend EU jobs”, the European Parliament said on its website.

The European Commission, the EU’s executive arm, has given itself until this summer to decide whether China should be granted market economy status.

Commissioner Vytenis Andriukaitis, Lithuania’s representative to the EU executive, told MEPs that the Commission all but ruled out doing so, saying that “any such move would be untenable”.

EU relations with China were established in 1975 and are governed by the 1985 EU-China Trade and Cooperation Agreement and seven other legally binding agreements.

When China joined the WTO in 2001, it was considered a centrally planned economy, and the terms of its accession required the country to be treated as a "non-market economy" for 15 years.

In a nutshell, prices and costs were regarded as artificially low and unreflective of normal market forces due to state subsidies that its domestic industries enjoyed. As a result, it was easier for other countries to launch anti-dumping probes and impose high duties on Chinese exports.

Beijing has long interpreted the accord to mean that it would automatically be given MES at the end of 2016. Already, more than 90 countries, including the ASEAN states, recognise the MES of China. Australia and New Zealand have agreed to an FTA with China. However, the US, the EU and Japan have not given their say yet on the MES. They would need to pronounce themselves by the end of the year.

  • December 2016: WTO to re-examine China's terms of membership and decide whether or not to grant market economy status.

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