In World Economy News 15/04/2015
China’s top diplomat in Brussels warned the European Union not to disregard changes to global trade rules set to favour Beijing and which European companies fear will open the bloc to a flood of cheap Chinese goods.
World trading powers including Europe are in a bind over how to interpret a World Trade Organization protocol that treats China as a more market-based economy from late 2016 – a status that will make it harder for the EU to protect local industry.
The decision will shape Sino-EU relations for years to come, either souring ties or potentially building goodwill as China opens up its markets, despite the risks to EU firms at home.
“This is not something bilateral (with the European Union),” China’s ambassador to the EU, Yang Yanyi, told the European Parliament’s trade committee in rare public comments by China on the highly sensitive issue.
“According to the WTO, China will obtain this market economy status in 2016, next year. So we hope that all sides abide by WTO rules and don’t resort to protectionism and prudently use trade defence instruments,” she told lawmakers.
The issue is likely to be at the centre of an EU-China summit that Yang said would take place in Brussels in June.
The 28-country European Union needs to decide on its approach soon because of the legislative changes it will entail and parliament’s approval.
The WTO recognised when Communist China joined the trade body in 2001 that its local prices are not set by market forces but said limitations on its exports would expire 15 years after the date of accession.
WTO members can normally apply punitive “anti-dumping” tariffs on others only if export prices are below those in the exporter’s home market. But with China, the EU and others have been able to ignore low domestic prices and set tariffs to make Chinese exports as expensive as in wealthier countries.
Those WTO limitations on China appear to expire on Dec. 11, 2016, although it is not clear exactly what that implies.
As reported exclusively by Reuters this month, the European Commission’s legal service has warned the EU would not have a good case to disregard the expiration of China’s right to claim equal treatment with its competitors.
European manufacturers have their own legal analysis.
“Only with Alice-in-Wonderland logic could a state-planned economy become a market economy just by the mere passage of time,” said Milan Nitzschke, a German solar power executive who has led efforts to protect the EU solar industry from unfairly cheap Chinese imports.
