David Martin MEP

Labour Member of the European Parliament and one of the six MEPs representing Scotland in Brussels and Strasbourg

China and the EU: Ensuring a level playing field

China-at-EP.jpgEurope must defend its jobs and industry in the face of unfair competition. That is the clear message set out in the position paper adopted by the Socialists & Democrats (S&D) Group on Monday 14 March.

Together with our centre-left sister parties across Europe we sent a strong signal to the European Commission and Council of Ministers - we support strengthening EU-China relations based on a level playing field and the principle of fairness.

Whilst valuing the economic benefits of greater co-operation with China, the world's largest trading nation, Europe must not be a soft touch. It should not be afraid to use the all the tools at its disposal to protect European industries against dumping and other harmful trade practices.

Why now?

1. UK and European Industry in crisis

According to UK Steel 2015 was "a year of a dramatic upheaval and anxiety for the UK steel industry" resulting in about 5,000 job losses. You will have seen on the news in January the tragic closing of Tata Steel's plant in Redcar in the North East. But since September 2015 over 250 jobs have been lost in Motherwell and Cambuslang in Scotland too. These are all areas that can ill afford the loss of these skilled jobs.

Across Europe there are over 40,000 fewer jobs in the steel industry compared to 2007. This is in a large part down to unfairly cheap imports from China, who are dumping their overproduction onto the EU market at rock-bottom prices.

But it isn't just steel that has been affected, other sectors at risk from Chinese dumping include aluminium, bicycles, ceramics, glass, car parts and paper.

2. 'Market Economy Status' for China

In 2001 China was welcomed as a member of the World Trade Organisation (WTO). At this time it was recognised as a 'non-market economy'. This is because of the way that the Chinese government routinely interfered in the economy, meaning that we could not trust the pricing of their goods.

In November 2016 this status is up for reassessment because of a clause in their WTO accession treaty. According to the Chinese and the initial legal assessments of the European Commission, they should be granted market economy status automatically once fifteen years had elapsed. Despite this, the Chinese economy is still characterised by high levels of government meddling. In its own assessment of the Chinese economy in 2011, the Commission argued that it failed four of the five criteria that a market economy should fulfil.

This whole debate seems quite academic, but in relation to the previous point it is actually very important. The (non-)market economy status has a big influence on the calculations used in anti-dumping cases (that is, the measures that the EU can take against a trade partner when they are trading unfairly). In this case it might mean that the EU is less able to protect itself from the suspect practices outlined in point 1, leaving industry and jobs more vulnerable. One study has even suggested that millions of European jobs are at risk should China be granted this status unilaterally. More such work on the impact of this change of status needs to be done so that we can have the full picture of the risks involved.

3. The European Commission is currently negotiating an EU-China Investment agreement

In November 2013 the EU launched negotiations with China for a 'comprehensive EU-China Investment agreement'. Chinese investments into the EU went up to €1.1 billion in 2013 - +1100% compared to 2009. However they still only count for a small part of the total foreign direct investment into Europe, and EU investment flows in the other direction count almost eight times as much.

We think it vital that European investment in China is protected from discriminatory practices. Therefore, it is imperative that any investment agreement has strong conditions attached. It must be a balanced agreement that protects governments' right to regulate.

For these three reasons in particular it is crucial that we form a united EU position in our relations with China as soon as possible.

What are the S&D group's key demands?

Our group opposes any granting of market economy status to China in 2016 in the current circumstances. This is a political decision with far-reaching consequences and cannot be left to lawyers. We urge the European Commission to cooperate with the other WTO members in order to strategically coordinate a common approach.

Before any decision on market economy status is made, we demand a solid and comprehensive impact assessment on the consequences for jobs and sustainable growth in all EU sectors and on China fully complying with the five criteria set by the European Commission.

Our group urges the European Commission and the Council to improve and modernise the EU's trade defence instruments to make sure they are fit for their purpose - defending European industry from unfair competition.

Any EU-China investment agreement must fully conform with the conditions set out in the S&D group position on investment from 4 March 2015. Most importantly - any investment agreement should not affect a government's right to regulate on behalf of its citizens.

With this position our group is confident that we can continue to grow our trading relationship with this important economy whilst protecting our industry from unfair competition.


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