EU, China and trade

Markus Beyrer / Mar 2016

Jean-Claude Juncker, president of the European Commission, Li Keqiang, prime minister of China, and Donald Tusk, president of the European Council. Photo: European Union

The European Union and China have amultidimensional economic relationship—we trade over 1 billion euro per day, we are negotiating an investment agreement, and we look forward to China’s accession to the Government Procurement Agreement of the WTO-World Trade Organisation.

But the question of how to address China in anti-dumping investigations will feature prominently in our relationship this year. Certain provisions of China’s protocol of accession to the WTO will expire by the end of 2016 and the question on everyone’s mind is what this will mean for the way in which WTO members treat China in anti-dumping investigations. European business believes that the answer will have to involve China.

Many observers refer to this issue as a question on whether China should be granted market economy status (MES). The European business community believes that the expiry certain provisions of China’s accession that the two issues should be treated separately. As it is not automatic after December 2016, the question of MES should be treated in accordance with WTO and EU rules and be based on its own merits.

There are more than two ways to look at this question. This question is not just about China, this question involves China. China is one of the largest exporters in the world, and equally, maintains a uniquely interventionist approach to industrial and trade policy. Its policies will likely have a real impact on how this debate will play out this year.

Europe has a huge stake in China’s economic success, and China has a huge stake in our success. But Chin faces huge challenges which it will need to address. China needs to speed up its internal reforms, let the market play a more decisive role, do more to address overcapacity in a range of sectors, and it needs to remain open for business.

And all of these issues play a role in the current debate. We have a partnership with China, and a partnership goes both ways. China relies strongly on its protocol of accession and insists the EU needs to change its anti-dumping legislation to honour its commitments under the WTO. This is something the EU is now assessing. 

But China cannot sit still in this process. China focuses on its rights in the WTO, but it also needs to focus on its obligations. China is still not fully transparent about its policies, it does not adequately notify to the WTO its subsidies and certain programmes related to State Owned Enterprises, and there are still many technical barriers to trade that are either not notified or raise concerns among other WTO members.

China’s economic policies will have an impact on the debate in Europe. Europe’s decision-making process on this issue is complex and a decision to change anti-dumping legislation requires the approval of the European Council and the European Parliament. There are also deep concerns on the possible impact that a change in methodology might have on the effectiveness of the EU’s antidumping instruments.

While the EU and China have a strong and multidimensional relationship, the interpretation of China’s accession protocol is currently unclear and this is an important issue for both sides. It is a difficult question and the EU is currently moving forward with a public consultation and an impact assessment. At the same time, China should not sit and wait. We need clear policy signals from China that it remains committed to comply with its obligations under the WTO, and that it effectively addresses the issues that give such rise for concern in the debate on anti-dumping measures.

Finally but not less importantly this debate is not exclusive to the EU as other WTO members have also to address the issue of how to treat China in anti-dumping procedures. Important trading partners for China and the EU like the US or Japan will have to take a stance and divergent decisions might have a significant impact on trade flows. For this reason coordination between major trading partners is of critical importance.

Markus Beyrer

Markus Beyrer

March 2016

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