Market-economy status and steel on the table at the EU-China summit

BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/30

Beijing hosted the 18th EU-China summit in mid-July. Top-level discussions touched on e.g. Brexit impacts and tensions in the South China Sea, but the hottest topic was perhaps if the EU would finally get around to granting China market-economy status. The decision is expected later this year. China claims that during its WTO membership talks, the parties agreed that market-economy status would be conferred automatically when China completed its 15th year of WTO membership in December 2016. On the EU side, however, a common view has not yet formed, whether to grant the status or not. The view is mixed both between the EU countries and between the EU institutions. The granting of such status would be a political recognition, but in practice the granting of market-economy status to China would make it more difficult to impose anti-dumping sanctions on Chinese exports to Europe.
 
After the meeting, European Commission president Jean-Claude Juncker linked the discussion of granting market-economy status to China’s domestic steel overcapacity problems. The EU and China decided to create a joint working group on steel to allow frank discussion on overcapacity problems as well as monitor Chinese measures to resolve its steel issues. China accounts for about half of global steel production. At a time when its economic structures are changing, domestic steel demand is expected to fall and many fear that the country will try to dump even more steel onto the global market. The EU has already imposed anti-dumping tariffs on Chinese steel, claiming that China has been selling steel at prices below production cost in Europe. A week after the meeting, China decided to impose anti-dumping tariffs on certain types of steel imported from the EU, Japan and South Korea.

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