God save Europe… and the paper!

Granting Market Economy Status to China Would Eliminate Millions of EU Jobs (including in the paper chain)

Following China’s admission into the World Trade Organization (WTO) in 2001, there has been much debate about whether the country should be given market economy status, with officials in Beijing arguing that it should be considered as such by 11 December 2016.

Traditionally, the EU and US have argued that China should not be considered a market economy because its domestic prices were set by government policies, rather than market supply and demand.

As a result of not considering China to be a market economy, it effectively allows the US and EU to impose much higher duties and tariffs on imported Chinese goods.

Despite early skepticism towards China, the EU’s approach seemed to change somewhat in July when the European Commission’s legal service announced «it would be unwise not to grant market-economy treatment to China.»

The announcement sparked widespread public debate about the ramifications and opportunities of granting China market economy status, which was closely followed by a report from the US-based Economic Policy Institute (EPI), which said that granting China market economy status would put between 1.7 and 3.5 million EU jobs at risk.

Many reports concluded that recognizing China as part of the market economy world would make it harder for the EU «to impose tariffs on dumped goods allowing Chinese companies to undercut domestic production by flooding the EU with cheap goods.»1

Just the case of the paper! On May 6th 2011 the Council of the European Union, adopted definitive anti-dumping (Reg.n. 451/2011) and definitive countervailing (Reg. 451/2011) duties on coated fine paper, which is paper or paperboard coated on one or both sides (excluding kraft paper or kraft paperboard), in either sheets or rolls, and with a weight of 70 g/m2 or more but not exceeding 400 g/m2 and brightness of more than 84 from China.

Total Italian import of all items touched 1,1 mln tonnes in 2007 and declined progressively during following years, going to 632 kT in 2014. Import from China, near to 2% in 2006, rose rapidly year by year to the top of about 39 kT in 2009 (5% of total import). On November 2010 EU Commission established provisional AD duties; on April 2010 Commission published the notice of initiation of AS proceeding.

Import from China of this item, representing 5,4% of import from all origins in 2006, rose rapidly to the top of 12,3% in 2009; prices per ton were very reduced respect to the means of total import (which includes China and Indonesia/South Korea). The drastic decline in 2011, after the double EU imposition of AD and AS duties, and, in any case, the restraint volumes during following years are evident.

The UK is a strong supporter of conferring market economy status.

Italy’s Prime Minister Matteo Renzi has urged the EU not to “unilaterally disarm” against Chinese dumping. Berlin and Paris remain coy.

1According to a report by the Economic Policy Institute (EPI), granting market economy status (MES) to China could put about 3.5 million jobs EU in the EU Member States at risk in the sectors the most affected by the agreement. The causes of this include China’s overcapacity development strategy and dumping, which could affect sectors relating to the production of steel, chemicals, motor vehicle parts and environmental technologies.