Market Economy Status for China? The views of AEGIS Europe China Market Economy Status Latest developments and implications for the industry EESC, Brussels, 5 April 2016
I. About AEGIS Europe AEGIS Europe brings together over 30 European manufacturing associations committed to free and fair international trade. Our members account for more than 500 billion in annual turnover, as well as for millions of jobs across the EU. We are united in opposing the automatic granting of Market Economy Status (MES) to China.
II. About China and EU Trade Defence 80% of all EU anti-dumping and anti-subsidy investigations are against China. Global anti-dumping and anti-subsidy actions against China have increased by 60% since 2010. The Commission stresses that the share of imports from China to the EU affected by AD measures is only 1.38%, but this is misleading. Without effective AD measures, the survival of many sectors would be put at risk. An effective Trade Defence is extremely necessary in the case of China
III. But what is it all about? Granting automatic Market Economy Status to China would make EU anti-dumping measures ineffective. This would lead to unlimited access to EU market for Chinese goods. However, China does not play by the rules and there is no level playing field for EU producers. To avoid unfair competition, and to defend millions of jobs, the EU must preserve the effectiveness of its trade defence instruments.
IV. Environmental consequences Chinese and EU manufacturing are 80% and 28% respectively based on coal. Granting MES to China would massively increase Chinese coal-based imports into the EU and hence, undermines COP 21 objectives. European manufacturers invest an important part of their turnover in R&D/Innovation. Production drives green innovation. The EU plays a key role in promoting sustainable development globally. Granting MES to China would have a major negative impact on it.
Example: A bicycle produced in China generates up to 123 Kg CO2 more than a bicycle produced in Europe! because of CO2 emissions from aluminium and steel production Chinese bicycles manufacturing produces higher emissions than production in Europe. CO2 emissions from maritime transport 60% of containers (with peaks of 90%) go back to China empty. The more trade deficit grows, the more empty containers will travel back. By 2020 shipping will be the biggest single emitter of air pollution in Europe, surpassing the emissions from all land-based sources together.
V. Consequences for EU jobs AEGIS Europe evaluates that at the end of March, 387,000 direct jobs linked to products covered by AD measures or under investigation are at risk with, in addition, huge impact on indirect jobs. Moreover, Chinese dumping would lower prices in Europe and put in danger the standards of EU quality jobs. A recent study from US Economic Policy Institute estimates that the EU s unilateral granting of MES to China would result in: Up to 3.5 million EU jobs at risk. 1-2% reduction in EU GDP. Up to 142.5 billion increased EU imports of manufactured goods. Today: steel, ceramics, aluminum, bicycles. Tomorrow: mechanical engineering, advanced materials, telecommunications
Industry & Trade Unions together to say no to China MES - Stop China MES March, 15 February
VI. Is China a Market Economy? China fails on 4 out of 5 market economy criteria: I. Low governmental influence over allocation of resources and decisions of enterprises. II. Absence of state-induced distortions in operation of enterprises linked to privatisation. III. Transparent and non-discriminatory company law. IV. Laws on respect of property rights and operation of a functioning bankruptcy regime. V. Existence of a genuine and independent financial sector.
VII. Why are we talking about China s Market Economy Status? On 11 December 2016, only Section 15(a)(ii) of China s Accession Protocol to WTO will expire. Many stakeholders involved in the MES issue tend to consider that, because of the (a)(ii) expiry, there would be a legal obligation for WTO members to grant Market Economy Status, but this is only one of the possible interpretations. The remainder of Section 15, which will remain into force, still provides a legal basis for implementing a methodology alternative to the standard methodology - to determine subsidies and dumping in Chinese proceedings. Europe, US and other WTO countries are now considering how to move forward.
VIII. What is the European Commission considering to do? The European Commission is currently assessing three options: 1. No EU policy change - leave the current legislation and practice concerning the treatment of China unchanged. 2. Granting MES to China - removing China from the list of nonmarket economy countries in the EU anti-dumping legislation. 3. Granting MES to China and, at the same time, strengthening other provisions of the trade defence legislation (mitigating measures). The Commission launched a public consultation on the impact of a possible changed of methodology with respect to Chinese AD procedures, on the basis of these three options. Another public consultation has been launched in parallel by some MEPs.
The European Commission s Three Options: Option 1: No EU policy change Option 2: Grant MES to China Option 3: Grant MES, with mitigating measures Pro Preferred option to protect EU industry. China does not fulfil EU criteria of a market economy. Preferred by China and other stakeholders. Pushed by the European Commission. Against Would allegedly infringe EU obligations within WTO. Devastating impacts on EU jobs and growth. Proposed mitigating measures will be ineffective in protecting EU industries.
IX. Our main messages Any methodology based on Chinese prices and costs ( standard methodology) would not find dumping margin because of the distortions the Commission proposal to grant MES with mitigating measures is ineffective. There is no legal obligation to grant MES (no automaticity) The remainder of Section 15 allows to implement an alternative methodology for China. There can be no reversal of the burden of proof, which shall remain on Chinese producers MET experience.
Our main messages China has to fulfill its commitment to allow prices to be determined by market forces, before Chinese prices and costs can be used commitments cannot be unilateral. Anti-Subsidy procedures will not be useful Chinese subsidies are not specific; moreover China does not cooperate in providing data on subsidies (no transparency). The EU needs to coordinate with key international partners, especially with the US link with TTIP.
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