EU starts on tricky path towards relaxing China trade defense

Sun Jan 10, 2016 6:17am EST
 
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By Philip Blenkinsop and Robin Emmott

BRUSSELS (Reuters) - The European Union will take the first step on Wednesday towards refashioning its trade ties with Beijing, torn over how to lower its defenses to avert Chinese retaliation while protecting key industries against a damaging flood of cheap imports.

Commissioners from the bloc's 28 members will debate for the first time the politically sensitive issue of granting China "market economy status" from December, which Beijing says is its right 15 years after it joined the World Trade Organisation.

The coveted status would make it much harder for Europe to impose anti-dumping duties on Chinese goods sold at knock-down prices, changing the criteria for determining a fair price.

A study by a group of 25 European manufacturing federations estimates the European Union could lose up to 3.5 million jobs if it removes its trade defenses against China.

The bloc's final decision, taken together with EU governments and the European Parliament, will set it on a collision course either with Beijing or with its own manufacturers and with Washington, which sees no obligation to treat China's heavily state-shaped economy as a market economy.

"My opinion is that China is not a market economy. But it is a major trade player and we have to take that into account," said one senior EU official.

The Commission must take the initiative and all signs point to it accepting China as a market economy while seeking to keep trade defence measures for a transition period, which could appeal to sectors such as steel, chemicals or textile makers.

This could take the form of maintaining existing duties until their natural expiry - typically five years - and potentially raising duties imposed for illegal subsidies.   Continued...

 
File photo of the the fifth China-EU high level economic and trade dialogue at Diaoyutai State Guesthouse in Beijing, China, September 28, 2015.REUTERS/Kim Kyung-Hoon