- Wendy Wang
- Issue Time
As the deadline for granting China 'market economy status' approaches, Commissioners from the 28- member European Union are set to begin talks on January 13 on reorganising trade ties with the bloc's second-largest trading partner to avoid a backlash from Beijing while protecting its industries from a flood of cheap Chinese imports.
Beijing has demanded the coveted status from December as a matter of right 15 years after it joined the World Trade Organisation. That would make it much harder for Europe to impose anti-dumping duties on Chinese goods sold at knock-down prices, changing the criteria for determining a fair price, according to an agency report.
While a study by a group of 25 European manufacturing federations estimates the European Union could lose up to 3.5 million jobs if China is granted the status, the overall opinion is divided on whether to treat Beijing as a market economy all given the state controls in the Asian country.
"My opinion is that China is not a market economy. But it is a major trade player and we have to take that into account," said one senior EU official.
Swedish lawmaker Christofer Fjellner, a member of the European Parliament's influential trade committee, said there was concern among members about yielding to Beijing's demand, but also fear of retaliation if Europe did not.
"The Commission is between a rock and a hard place... I expect the Commission to be creative," he said, adding he expected a proposal for parliament in February or March.
The Commission will have to take the initiative. For the present, all signs point to it accepting China as a market economy while seeking to keep trade defence measures for a transition period, which could appeal to sectors such as steel, chemicals and textiles, the report said.
This could take the form of maintaining existing duties until their natural expiry - typically five years - and potentially raising duties imposed for illegal subsidies.
The bloc's final decision, taken together with EU governments and the European Parliament, is likely to set it on a collision course either with Beijing or with its own manufacturers and with its largest trading partner the US, which does not treat China's 'heavily state-shaped' economy as a market economy.
Chinese officials have said they could show flexibility in allowing a transition period for particular European industries. A 2013 deal to end an EU investigation into Chinese dumping of solar panels showed Beijing and Brussels can find agreement.