FT.com: US Warns Europe Over MES to China

[Shotgunner51]

http://www.ft.com/intl/cms/s/0/a7d12aea-a715-11e5-955c-1e1d6de94879.html#axzz3vh3EgSAz

December 28, 2015 2:07 pm
Christian Oliver in Brussels, Shawn Donnan in Washington and Tom Mitchell in Beijing

The US is keen to stop Chinese companies flooding markets with what it regards as unfairly cheap goods

Washington has warned Brussels against granting China ‘market economy status’, saying the long-sought trade concession could hamper efforts to prevent Chinese companies flooding US and European markets with unfairly cheap goods.

Achieving market economy status (MES) at the World Trade Organisation is one of China’s core strategic goals. Among other benefits, it would make it far more difficult for the US or EU to impose steep tariffs on Chinese companies for unfairly dumping low-cost goods on their markets.

US officials have warned EU counterparts that granting Beijing MES would amount to “unilaterally disarming” Europe’s trade defences against China. In private, they are scathing about the move, which they see as the latest example of Europeans seeking to curry favour with Beijing to gain billions of euros in investment.

But the European Commission, the EU’s executive arm, is growing increasingly sympathetic to China’s pleas. The commission is expected to make its decision as early as February.

German chancellor Angela Merkel is supportive of the idea while George Osborne, the UK chancellor who has spearheaded Britain’s courtship of Beijing, is a firm advocate.

Other European governments, led by Italy, and a growing swell of European labour unions and traditional industries — including steel, ceramics and textiles — are strongly opposed. Partly at their prompting, senior US trade officials have repeatedly raised their concerns with their European counterparts in recent months.

The debate centres on a dispute over the terms of China’s agreement of accession to the World Trade Organisation in 2001. Beijing has long interpreted the accord to mean that it would automatically be designated a market economy at the end of 2016.

But many trade lawyers disagree with this reading of the rules. Opponents argue that Beijing’s hand in setting prices, providing subsidies to an array of industries and other statist policies should disqualify it from MES.

“China was accepted into the WTO almost 15 years ago on an expectation that it would now be a market economy. It is not and it would be wrong to treat it as such when it meets so few of the criteria,” said David Martin, a British Labour member of the European Parliament, which would have to support any commission proposal for MES. ​

The EU’s deliberations come at a particularly sensitive moment for Europe’s steel industry, which has lost a fifth of it workforce since 2009 and blames many of its woes on unfairly cheap Chinese imports.

At the same time, the commission is keen to repair trade relations with China after a string of acrimonious disputes in recent years. It is seeking big Chinese investments in a €300bn infrastructure fund designed to rekindle flagging growth in Europe.

The commission declined to comment on its decision, which officials say is still under consideration. However, diplomats and businessmen involved in the process say momentum is building for a positive decision on MES in the first quarter of 2016.

“Brussels’ attitude towards China is better than Washington’s,” said Tu Xinquan, a trade expert at the University of International Business and Economics in Beijing. “Of course, EU industries won’t welcome market economy status for China. But I think it’s quite likely to be granted.”​

Under WTO rules, China’s non-market economy status gives the US and EU far greater latitude in determining the fair cost of production for Chinese companies when conducting anti-dumping investigations. As a consequence, say trade lawyers, that has made it easier for complainants to prove their cases against China.

The Obama administration, which is being cheered on by US industry, is advocating a policy of inaction, which would force China to bring a challenge in the WTO and thus put the onus on Beijing to prove that its state-heavy economic model has met all the criteria for MES.

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Other links on this:

Report: US wary of EU-China trade ties
EU could lose 3.5 million jobs if cuts trade defenses against China: report| Reuters
Global Manufacturing Execution Systems (MES) Industry
Steel trade issues should not be linked to MES: Chinese mission to EU - China.org.cn​

@Arryn @TaiShang @Indos

 

[21stCentury]

Why is the US trying to stop free market ?

 

[TaiShang]

German chancellor Angela Merkel is supportive of the idea while George Osborne, the UK chancellor who has spearheaded Britain’s courtship of Beijing, is a firm advocate.

Did not quite understand the sentence. So, both of them supportive of MES status being given to China? The use of "while" is confusing but I understand from the context that both Germany and UK are in favor. In that case, China seems to have garnered the support of the two most important actors in the European scene. The rest of the smaller countries' opinion would matter under the EU framework but I believe Germany has a certain convincing power to change their minds and hearts.

The EU’s deliberations come at a particularly sensitive moment for Europe’s steel industry, which has lost a fifth of it workforce since 2009 and blames many of its woes on unfairly cheap Chinese imports.

At the same time, the commission is keen to repair trade relations with China after a string of acrimonious disputes in recent years. It is seeking big Chinese investments in a €300bn infrastructure fund designed to rekindle flagging growth in Europe.

It is definitely a trade-off between two evils, perhaps, and giving China MES status would prove to be more profitable at the end of the day because that would open up greater flow of capital and investment from China into Europe. If the EU shows some betrayal and lines with the US in its effort to contain China economically and militarily, then China would make it harder for European companies to do business in the country (think of the impact on, say, Volkswagen).

If not momentarily, the EU will come to terms with China much earlier than the US, that's for sure. China has to break that Atlanticist choke on the Europe and integrate the continent under the Eurasian connectivity framework. China's recent diplomacy efforts all point to this direction, in fact.

 

[Shotgunner51]

Did not quite understand the sentence. So, both of them supportive of MES status being given to China? The use of "while" is confusing but I understand from the context that both Germany and UK are in favor. In that case, China seems to have garnered the support of the two most important actors in the European scene. The rest of the smaller countries' opinion would matter under the EU framework but I believe Germany has a certain convincing power to change their minds and hearts.

It is definitely a trade-off between two evils, perhaps, and giving China MES status would prove to be more profitable at the end of the day because that would open up greater flow of capital and investment from China into Europe. If the EU shows some betrayal and lines with the US in its effort to contain China economically and militarily, then China would make it harder for European companies to do business in the country (think of the impact on, say, Volkswagen).

If not momentarily, the EU will come to terms with China much earlier than the US, that's for sure. China has to break that Atlanticist choke on the Europe and integrate the continent under the Eurasian connectivity framework. China recent diplomacy efforts all point to this direction, in fact.

I suppose that means Angela Merkel is on the same page with George Osbourne in this regard, i.e. supportive of removing trade barriers. Yes if Germany decides for a go, I believe she has influence over the smaller members to solidify an EU action, the question is can they withstand US pressure?

 

[Beast]

China shall openly declare investment in Europe is tied to MES status. No MES , no investment. And see what the European can do. Only China has the big money to spend. Not even Arab, japanese and indian could save them.

Time is with China.

 

[Shotgunner51]

China shall openly declare investment in Europe is tied to MES status. No MES , no investment. And see what the European can do. Only China has the big money to spend. Not even Arab, japanese and indian could save them.

Time is with China.

Bro there is no problem with EU, read carefully into the news and background. The core question is whether they can withstand political pressure from Washington.

 

[TaiShang]

There is a growing mistrust toward the US in the traditional European scene (save UK, perhaps). This has become more visible with the migrant crisis brewing at the doorsteps of Europe. The only solution they came up with was to bribe Turkey with some 3billion and an a distant promise of visa-free regime, and Turkey agreed to close the door for migrant movement.

The US was absent during the entire saga. I do not really see any benefit of yielding to US pressure on this purely economic issue, which would benefit the EU more than it would the US.

EU has to learn to act like a sovereign bdy, and this is a nice litmus test. They have to decide whether they wish to be an integral part of the OBOR connectivity project or simply stay within the old boring framework of US-led Atlanticism.

Time to prove that the EU is not that "old."

I suppose that means Angela Merkel is on the same page with George Osbourne in this regard, i.e. supportive of removing trade barriers. Yes if Germany decides for a go, I believe she has influence over the smaller members to solidify an EU action, the question is can they withstand US pressure?

 

[Beast]

Bro there is no problem with EU, read carefully into the news and background. The core question is whether they can withstand political pressure from Washington.

No, there is the Italian and other minor European countries afraid of more competitive Chinese goods resisted the idea plus with US flaming the rejection plea.

 

[yolo2016]

Why is the US trying to stop free market ?

I see this is a tough article for you to comprehend

It is saying the opposite i.e. Free market is free of government rigging prices through subsidies to private firms, for the precise reasons to kill global competition. You are free to subsidize for your local economy in many cases, but should not when going after a global market. It is a warning to EU that their industries will be disseminated through flooding of cheap goods. After Which China is left as the only source, and they then jack the prices to exorbitant rates.

 

[jmacmac]

I see this is a tough article for you to comprehend

It is saying the opposite i.e. Free market is free of government rigging prices through subsidies to private firms, for the precise reasons to kill global competition. You are free to subsidize for your local economy in many cases, but should not when going after a global market. It is a warning to EU that their industries will be disseminated through flooding of cheap goods. After Which China is left as the only source, and they then jack the prices to exorbitant rates.

U mean just like the TTIP

 

[Shotgunner51]

I see this is a tough article for you to comprehend

It is saying the opposite i.e. Free market is free of government rigging prices through subsidies to private firms, for the precise reasons to kill global competition. You are free to subsidize for your local economy in many cases, but should not when going after a global market. It is a warning to EU that their industries will be disseminated through flooding of cheap goods. After Which China is left as the only source, and they then jack the prices to exorbitant rates.

Indeed it's tough to comprehend, when such warning to EU comes from US.

Does the "Free Market" US government has any role with flooding of cheap US chicken, corn, beef and agricultural produce?


The Farm Bill | USDA
Agricultural Marketing Act - Federal Grain Inspection - Farmers
Public Law 73-10, 73d Congress, H.R. 3835, Box 54, Folder 1 - William McChesney Martin, Jr., Papers - FRASER - St. Louis Fed
https://www.gpo.gov/fdsys/pkg/PLAW-109publ58/html/PLAW-109publ58.htm

 

[TaiShang]

Washington alone in refuting China’s MES
Global Times Published: 2015-12-30 0:43:01

According to reports, Washington has warned Brussels against granting the market economy status (MES) to China, saying the decision would hamper their efforts to prevent Chinese firms from dumping unfairly cheap goods on the US and EU markets, and amount to "unilaterally disarming" Europe's trade defense against China. US officials were scathing about the European move, thinking Europeans are trying to curry favor with Beijing for vast investment.

Under the Chinese accession protocol to the World Trade Organization (WTO) in 2001, China can be treated as a non-market economy during a 15-year period, which allows the WTO members to adopt alternative methodologies for determining normal values of Chinese goods in anti-dumping investigation. This principle will not apply once China is granted the MES, and the protocol stipulates that relevant provisions will expire by the end of 2016.

So far over 90 countries, including Australia, South Korea and the ASEAN countries, have recognized the MES of China. Since the accession protocol stipulates that China will be automatically granted the MES after December 2016, it is believed that the EU wants to make a favorable gesture and reach a decision as early as February.

Against this backdrop, the US claimed that the automatic granting of the MES is misreading of the provisions and that the granting of the MES status should be postponed. The US and EU are split on the matter.

European countries led by the UK, Germany and France have proactively developed closer ties with China in recent years and consider China-EU cooperation as a critical opportunity. Keen to save its No.1 position, Washington can't help strategically counter China by being active in setting barriers yet reluctant to remove them. Different from the US, the EU is more interested in forging a mutually beneficial relationship.

Granting China MES is less significant than before. With the emergence of various free trade zones, the function of the WTO has been diluted. After years of competition and engagement, the EU has fully acknowledged China's ability to wield its market influence.

Russia, which joined the WTO in 2012 and with a much less developed economy than China, was recognized by the EU as a market economy in 2002. Obviously China's MES is largely a political decision. No country has a market economy in a complete sense. The Chinese yuan's inclusion into the IMF's Special Drawing Rights basket is a global recognition of China as a market economy.

Europe has its own interest at heart in changing its attitude toward China's MES. Washington's bid to pressure European countries to promote its own interests will inevitably lead to disagreement and opposition. Europe is facing the urgent task of realizing economic recovery. It is hoped it can keep a clear mind when being warned by Washington.

Washington was already "betrayed" by Europe on joining the China-initiated Asian Infrastructure Investment Bank.

In the globalized era, instead of following Washington's lead, EU should consider its own interest.

@Chinese-Dragon , @tranquilium , @Edison Chen, et al.