EU
shifts against lower trade barriers with China
National
capitals maneuver as European Commission considers impact of looser
controls on Beijing.
By NICHOLAS VINOCUR
AND ALBERTO MUCCI 5/30/16, 5:30 AM CET Updated 5/30/16, 7:34 AM CET
PARIS — Europe’s
trade skeptics are gaining the upper hand in an intense war of
influence over whether China should be granted greater access to
world markets, according to sources involved in the talks.
The European
Commission will have to take a position on China’s request for
market economy status when it comes up for review at the World Trade
Organization in December, and that promises to be a tricky balancing
act between two camps in the EU. One faction led by Britain supports
freer trade with China, while another headed by France says that
granting Beijing full membership in the trade club could have
disastrous consequences for the bloc’s economy.
It’s a
long-running standoff that reflects Europe’s wider, north-south
split on trade. But as the deadline looms for deciding on China’s
market economy status growing skepticism toward free trade in Europe
and beyond is pushing the Commission to adopt a cautious, if not
openly hostile, attitude toward Beijing’s bid.
Further complicating
matters for Britain is its possible exit from the European Union.
Just as the continent’s protectionist forces are gaining ground,
the U.K. appears distracted and to be losing leverage in the fight.
“In a way, it’s as if Britain had already left Europe,” said an
official involved in talks who asked not to be named due to the
non-public nature of diplomatic discussions.
Earlier this year,
France and other skeptical nations successfully lobbied the
Commission to rewrite a report on the potential impact of granting
China market economy status, a document that will largely define the
bloc’s position ahead of the WTO decision. Its publication, first
planned for early 2016, has been delayed until July because some
countries complained that the original version was too favorable to
Beijing, according to sources close to the talks.
“Finally,
something seems to be moving” in the EU stalemate, said an Italian
government official. Italy is a member of the so-called “anti-dumping
coalition,” which also includes Spain and other countries that
believe market economy status would give China carte blanche to flood
the EU with cheap goods.
A country is
considered to have market economy status when its investment and
production are based on rules of supply and demand, and not due to
centralized decisions or government subsidies to a particular sector.
Giving that
designation to China would make it virtually impossible for the EU
itself to impose counter-measures against Beijing for trade practices
seen as unfair, especially when it comes to considering whether
Chinese products have been sold below market prices, or “dumped”
into the European market. The U.S. has been vocally opposed to
granting China market economy rights and, in the last month, slapped
import duties of more than 500 percent on certain types of Chinese
steel.
At the G7 summit in
Japan last week, Commission President Jean-Claude Juncker said Europe
was eager to do business with China. But, reflecting worries about
Chinese dumping that flared in the wake of troubles in Britain’s
steel sector brought on by the availability of cheaper Chinese steel,
he also warned that the European Union “could not be defenseless”
against market distortions.
‘Yes, but…’/’No,
but…’
The content of the
Commission’s paper is secret. But Brussels-based trade experts said
there was little chance of the Commission coming out clearly in favor
of a straight “yes” or “no” on the market economy status
question.
Instead they expect
the EU’s executive body to aim for a more nuanced position by
asking China to agree to allow anti-dumping measures to continue to
defend a number of European industries in exchange for a partial
“yes” to market economy status. For example, steel and ceramics —
the two industries most vulnerable to the free access of Chinese
goods — would likely lead a list of exceptions that the EU could
demand.
Despite Juncker’s
tough talk at the G7, Europe is wary of souring relations with a
crucial trading partner and vast potential market for European
products. Chinese investments in the EU are also a key consideration,
making up €5-€10 billion out of the €315 billion in public and
private funds in Juncker’s investment plan for Europe.
“That is a
variable that can’t be ignored,” said a national diplomat working
closely on the China issue.
The European
Parliament has also weighed in on the debate on whether the trade
designation for China would help or harm Europe’s economy, with an
overwhelming majority supporting a resolution urging the Commission
to reject it.
Alessia Mosca, an
Italian MEP who focuses on China issues in the Parliament’s
center-left Socialists & Democrats group, said members of the
assembly had started worrying about the impact on jobs and industry
of granting Beijing market economy status about a year ago — and
not trusting whether the Commission would ask the right questions.
“We started
inquiring into the work of the Commission,” Mosca said. “But the
answers were always so vague that we decided to escalate the level of
pressure.”
Their efforts
culminated in a vote May 11 against granting China the status
automatically. While the vote had no direct legal impact, it sent a
clear message to the Commission that opposition to the move was
strong across the European political spectrum.
The vote also was
seen as a “wake-up call” for the free-trade forces, according to
Carlo Lombardi, head of the Federacciai Brussels, an industry lobby
representing Italian firms.
Lombardi said a
steel industry crisis in Britain had helped to build support for the
vote. Indian steelmaker Tata announced plans last March to shutter
its British steel operations and potentially lay off as many as
15,000 employees. British Prime Minister David Cameron has had to
balance a defense of his government’s position against imposing
higher tariffs on Chinese steel with tough talk about protecting
British jobs, even as his diplomats continue to push for MES for
China.
Council battle
While the Commission
weighs input from member countries, a battle for influence is also
raging at the Council over what instruments Europe can use to defend
itself in the event that China does obtain market status at the WTO.
The countries
pushing for freer trade have long resisted attempts to raise the
tariffs that Europe can impose on Chinese imports.
But with Britain
distracted by its internal debate on Brexit, several sources said
London was looking increasingly isolated on the European stage, while
the anti-dumping coalition was gaining momentum in its efforts to
equip the bloc with more aggressive, fast-acting measures against
dumping.
Added another source
from among the China trade skeptics: “What strikes us is that the
British aren’t coherent … You can’t cry over the demise of your
domestic steel industry and at the same time argue for free trade
with China at the Commission — it doesn’t make sense.”
After German and
French economy ministers sent a letter to the Commission calling for
quicker implementation of defensive trade measures — such as tariff
increases and “balanced modernization” of the so-called
lesser-duty rule, which requires the EU to restrict its anti-dumping
fines to a level lower than the actual damage might be — Belgium
and Austria are sliding toward the skeptical camp, said sources close
to the talks.
If both countries
make the jump, a reform of trade defense measures is more likely,
handing a victory to the European nations and industries demanding a
more assertive stance against Chinese dumping and its effort to gain
market economy status.
Slovakia’s
upcoming presidency of the European Council could also boost the
get-tough approach towards China. The steel industry is the biggest
private sector employer in the country. “Slovakia understands the
importance of anti-dumping regulation,” said a lobbyist who asked
not to be named.
The European
Parliament’s vote shows the political climate is shifting.
“A lot of
countries have realized that the current instruments the EU has are
just not sufficient against Chinese dumping and the Council and
Commission can’t ignore them any longer,” said Daniel Caspary,
the coordinator from the center right European People’s Party in
the Trade Committee.
Authors:
Nicholas Vinocur
and Alberto Mucci
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