Brussels prepares market economy compromise for China

The European Commission is looking for a center route between China's clatter to be dealt with the same as cutting edge economies and grumblings from European part states and modern gatherings that surging imports from China are to be faulted at the collapse in steel costs.

China says it is consequently qualified for get market economy status all around — one of its most pined for political objectives — toward the end of this current year under World Trade Organization rules. Supporters of the move, including the UK, say that granting the status would help venture amongst Europe and China.

But other EU governments and Washington fear such a move would open the floodgates for ultra-cheap Chinese imports. The commission needs to strike a compromise as Europe’s anti-dumping laws are tied to a WTO protocol on China which expires in December.

A plan to be discussed on Wednesday by the commission focuses on the connection between China's status with parallel moves to brace Europe's exchange safeguards and requests on China to decrease overcapacity.

The exchange safeguard measures incorporate forces for Brussels to force high import obligations in instances of excellent overproduction, and new grandfathering rights to seek after hostile to dumping cases as of now in train under the old principles.

While European manufacturers are campaigning against granting China a “licence to dump”, the commission’s plan is cast to toughen penalties and avoid any weakening of current anti-dumping procedures.

Guidelines under which EU duties are calculated — known as the “lesser duty rule” — would be suspended in extreme cases. This would in effect remove a cap on levies.

“If the lesser duty rule was removed, in very simple terms it would enable the EU authorities to impose, in some cases, higher levels of duties,” said Peter Archbold, a senior director at Fitch credit rating agency.

“In Europe we’ve been seeing duty levels below 50 per cent, whereas in the US they’ve been well in excess of 200 per cent. And — certainly in part — that has contributed to the rise in the price of steel in the US.”

The plan would also accelerate EU anti-dumping procedures and there would be a strengthening of little-used anti-subsidy penalties.

But the initiative faces big hurdles, both in Europe and in China. Any change to the European regime would have to be endorsed both by member states and by the European Parliament, which has passed a non-binding resolution against market economy status for China.

Countries resisting change include Italy and Spain, and Germany is sceptical. Such resistance comes as western leaders feel the wrath of anti-globalisation sentiment and industrial groups say Chinese overproduction has put them under severe strain

In recent months Beijing has intensified its campaign for automatic entitlement to market status in December, the 15th anniversary of its WTO accession.

Last week EU and Chinese leaders resolved to set up a working group to monitor pricing and public subsidies to steel mills in China. While the commission’s plan ties market economy status to progress on that front, China’s willingness to cut overcapacity remains in question.