China - EU Relations

The EU-China relations are now about thirty years old. During this period, significant achievements have been done; the EU has become the biggest trading partner of China, and China has become the EU’s second largest partner behind the USA, but some problems still need to be tackled, the most sensitive being the trade imbalance, China’s human rights, China’s status as a market economy and the lifting of the EU arms embargo on China.

I chose to talk about the issue of granting to China the market economy status by the EU and I began my working paper with the following questions in mind. The most important are of course why the EU refuses to grant the MES to China and why it is important the issue of market economy status for China? What is the role of the EU member states in this issue? What progress, in implementing the commitments, in the context of accession to the WTO, made China?

The EU-China main problems

As I mentioned in the introduction, China is now the largest economic partner both for the EU and the USA. However, China is not renowned as a market economy by any one of these two partners, a situation that make it easier for the Chinese firms to be found guilty of dumping goods.

Despite the lack of an official request and explicit, China wants the EU to recognize it as a market economy. This status would run against charges of dumping of United States and EU and therefore helps to avoid the anti-dumping. China covers 97% of the production of metals, essential for the production of high-tech products. She wanted to impose a quota on exports but the EU has done everything to prevent. I think that EU wants more openness from China: more access to the financial system, raw materials and public tenders. This access is not possible for foreign companies, while Chinese enterprises have access to public works abroad. This is just one example of the hybrid character of China in world trade.

Since re-admission in 2001, WTO membership has given China much better access to European markets and this has contributed greatly to current EU trade deficits with Beijing. It has also brought to the question of MES. When China joined the WTO in 2001, the existing members, including the EU, insisted that Beijing remained classified as a non-market economy for a period of 15 years.

Chinese leaders argue that their country has already made a lot of efforts on the way to become a market economy and that many countries have already upgraded Russia to MES, without Moscow being yet a member of the WTO or its economy being more liberal than the Chinese one The Chinese reforms have had important results: China’s GDP has increased annually by 9,6% in average and more than 200 million people have been lifted out of absolute poverty between 1979 and 2005 According to this results, the Chinese claim that they deserve to be granted MES, so the EU should take this progress into consideration and to recognize China as a market economy. For the EU, China raises more challenges brought about by rapid economic developement.

For China, MES has become a question of political prestige , since the upgrade would signify that it is regarded as an equal economic partner for the EU. But in the other hand, MES is important to China because „it will reflect a more fair treatment in anti-dumping investigations since China in this regard would be put on an equal footing with its major trading partners. It would remove the possibility of using anti-dumping accusations as a weapon in trade disputes with China” In addition, the MES status will make it more difficult for the EU to impose anti-dumping duties on Beijing.

From 1979 to 2007, the EU started 136 anti-dumping investigations. China remains the EU’s main anti-dumping target. To this trade defense instrument, safeguards against Chinese exports have also been added. For instance, in 2002 measures have been taken against steel exports and in 2005 against a wide range of Chinese textiles and clothing. With regard to the textile sector, since 2005, with the Multi-Fibre Agreement (MFA) coming into effect, EU tariffs and quotas on Chinese textiles had to be removed, only to be partly reintroduced in July 2005 following protectionist protests across Europe.