Sieren's China: China wants market economy status China wants to be accorded market economy status. How tough is Beijing prepared to get?
The day of reckoning finally arrived. The condition stipulated by Article 15 that China could be treated as a “non-market economy” for 15 years after joining the World Trade Organization (WTO) no longer holds. After December 11, 2016, China was to be treated automatically as a market economy and certain trade barriers were supposed to be lifted.
The world’s largest economy wants to be accorded market economy status (MES) at last and be on an equal footing with the rest of the world. However, politicians in Beijing were hoping that the process would be smoother. Nothing so far has changed officially. Customs duties have not been removed. Indeed, just before the deadline, punitive anti-dumping tariffs were imposed on certain goods. Despite the fact that Beijing pointed out over and over again in recent months that the deadline was looming. There was hesitant response. From Brussels, there were indications that a solution were being sought, a compromise, to protect Europe from Chinese dumping prices and still meet the agreement. From the US, it was clear that there were no qualms about not meeting the agreement. Apart from China, nobody really wants the MES to be granted.
Problem of dumping prices
The concern with regard to China’s state-regulated markets is understandable. Many products from China are so cheap that European companies would have to close if they were not protected. The European steel sector has already suffered from the consequences of cheap steel from China. It is one of the cheapest exports at the moment, because China has several hundred million tons stored. On the other hand, cheap imports from the Far East also help to boost European economies.
From Beijing’s point of view, China has had to accept that it has not been treated in the same way as its partners – and that is gone on long enough. It is sick of being branded with the reputation of exporting cheap goods. The government is calling for MES not only for economic reasons but also because it does not want to lose face. If nothing is done, China could launch a trade war with the rest of the world.
Earlier this month, the ministry of commerce said that it would no longer be acceptable for the US and the EU to impose customs duties on Chinese goods. Beijing is appealing to the WTO to have each anti-dumping measure checked individually if need be. There is currently no talk of a trade war. However, the problem is that court cases would go on for years and this is why there’s been no outcry from the West.
EU looking for alternative protection mechanisms
In the current scenario, the West now has plenty of time to seek other protective mechanisms.
Since November, the European Commission has been discussing a suggestion that the imposition of punitive duties be separated from the MES so that in the future, any state which is fixing prices can be punished. Although this rule would apply to all members of the WTO it is clear that one country in particular is being targeted.
Why is Beijing not making stronger threats in return, for example to impose higher import duties itself? One reason could be the handover of power in the White House. Perhaps Beijing is waiting for the new year to see what happens in Sino-US relations. If President-elect Donald Trump’s statements during the campaign are to be believed, a 45-percent tariff could be imposed on Chinese imports. Or there could be entirely new agreements. China’s leadership likely does not want to precipitate anything amid such insecurity about Trump’s agenda.
So the day of judgement has been postponed to the new year. China’s status is not likely to change that easily. But since this concerns only a tiny percentage of the EU’s entire imports from China, this really is not worth mentioning. It’s less a question of money than of saving face.
Frank Sieren has lived in Beijing for over 20 years.