Presidents of European industry associations represented by AEGIS Europe sent a letter to European Commmission President Jean-Claude Juncker ahead of the College of Commissioners' orientation debate on the market economy status (MES) of China on 13 January.
Dear President Juncker,
We, the Presidents of European industry associations, are writing to you in view of the upcoming College of Commissioners’ orientation debate on 13 January 2016 to warn you of the serious damage that granting Market Economy Status (MES) to China could cause to many EU industries and jobs.
AEGIS Europe brings together nearly 30 European associations representing a broad variety of industries including traditional and innovative manufacturing industries, consumer branches, SMEs and renewable energy sectors, accounting for more than €500 billion in annual turnover and millions of jobs across the EU.
Fair competition, prevention of unfair trade practices and a strong anti-dumping tool are essential to ensure a level playing field for our industries. As you know an effective anti-dumping system is vital to preserve fair trade conditions for EU’s competitiveness on the global market, especially considering the huge overcapacities accumulated by China in many sectors. Chinese producers are able to sell at extremely low prices due to massive State intervention and China’s aggressive export policy is not expected to stop especially now that it is being fed by domestic growth slowdown.
It is publically and widely understood that China is not a market economy and that it has not fulfilled all the criteria set by the EU, in compliance with WTO law, to be considered as such. China is an economy still predominantly governed by State intervention and planning and its exports are driven by Five Year Plans impacting practically every single factor of production. Therefore, Chinese distorted prices must not be used as a basis to determine the normal value in anti-dumping investigations.
Furthermore, we wish to reiterate that there is no "automaticity" in the granting of Market Economy Status to China in 2016. On the basis of the remaining provisions of Section 15 of China’s WTO Accession Protocol there is no clear-cut obligation for the EU to swiftly recognise such a status. Even after 2016, China will still need to demonstrate that it meets the criteria set by the EU for obtaining MES.
In addition, any unilateral EU decision to grant MES is irreversible and would have severe consequences for EU growth and employment. The risk of adopting a methodology using local Chinese prices and costs could result in a loss of 300,000 direct EU jobs linked to the products covered by anti-dumping measures, affecting hundreds of thousands and potentially millions of indirect jobs. Moreover, given that the existence of a strong anti-dumping instrument is a clear deterrent against dumping, granting MES may lead to increased dumping, putting additional sectors not currently covered by anti-dumping measures at severe risk of job losses.
In view of this very complex and sensitive issue, it is imperative that any decision on this matter is based on a carefully thought out and, above all, transparent decision making process and that the EU coordinates with its major trading partners. Therefore, before any decision is taken by the College we would greatly appreciate if the Commission could:
In this framework, we remain open to exploring with the Commission how best to ensure that:
We hope that at the upcoming meeting of EU Commissioners you will take our views and concerns into account in order to avoid damages to the competitiveness of the EU industry and to the EU’s growth and jobs prospects.
We remain of course at your disposal for any further information you may require.
Presidents of European industry associations represented by AEGIS Europe
Context on the issue of MES is available in this short background note and document about the 10 myths and realities of MES. Below are some additional points that are important to keep in mind during the orientation debate on 13 January.
In the light of all of the above, the question of granting MES to China is likely to be the most important international trade issue of 2016. Therefore, as AEGIS Europe has repeatedly requested, including to President Juncker and to Mr Demarty, it is imperative that, prior to any decision, the Commission carries out a full and transparent impact assessment in accordance with the Commission's own Better Regulation guidelines, including a public consultation, carefully assessing the effects of all the different policy options.