Brussels impressed by China 'market economy' progress
HELENA SPONGENBERG
04.06.2007 @ 17:30 CET
EUOBSERVER / BRUSSELS – The European Commission is optimistic about market economy reforms in China, saying the Asian state has made "significant progress." But some are wary of Brussels sunny outlook on China's trade development.
In a commission assessment report presented to trade experts from EU member countries recently and seen by EUobserver, the EU executive says "China has made significant progress towards market economy status" in the last three years, adding that the Asian state has "shown evidence that it is committed to significantly reducing state interference in the management of companies."
In 2006, China remained the EU's second largest trading partner and displaced the US as the largest source of EU imports (Photo: European Commission)
But China has completed only one out of five technical conditions necessary to be granted a market economy status (MES) by Brussels, the commission points out.
Conditions include less government influence on companies; laws to end the ripping off of EU intellectual property; an end to tax breaks and soft bank loans for Chinese firms and the opening up of its vast government procurement sector to outsiders.
According to the commission's assessment, new laws in China could take the country closer to gaining MES.
"Proper implementation of these new pieces of legislation should contribute significantly to resolving a number of outstanding issues and will be a step towards creating the necessary conditions for a market economy," the report says.
"In the commission service's assessment, some of these issues could be addressed by China in a satisfactory manner within the next 12 months," it continued.
Gaining market economy status – sought by the world's new manufacturing superpower since 2003 - would make it easier for Chinese exporters to fight off European anti-dumping cases.
EU trade commissioner Peter Mandelson and Chinese trade minister Bo Xilai are set to meet next week on 12 June to discuss, among other things, China's trade progress.
Opposition to Brussels' trade policy
Meanwhile, some of Europe's most powerful industrial associations have complained to the EU executive over its soft line towards China, claiming European companies are being exposed to cut-price dumping by foreign rivals because of a secret change in trade policy in Brussels.
In a letter sent last week to commission president Jose Manuel Barroso - with Mr Mandelson in copy - the organisations claim that Brussels has secretly lowered Europe's defences against unfair subsidies by other countries and has shown "unequivocal political bias" against anti-dumping measures, the Financial Times reported on Monday (4 June).
The ten associations which signed the letter represent European industries most exposed to global competition, including textiles, chemicals, metals, mining and fertilisers.
Brussels started 36 anti-dumping measures last year - including famous cases involving Chinese shoes, plastic bags and bicycle parts - but there have been no similar moves so far this year .
The EU is divided between the interests of generally pro-free trade northern EU states - which have already outsourced production to emerging economies such as China and India - and southern EU countries fighting to keep their national industries alive.
"The commission operates a trade defence policy with great rigour and which is firmly anchored in the framework of the existing rules," a commission spokeswoman told journalists in Brussels on Monday, without wanting to comment on the letter directly.
The commission is currently seeking to give a sensitive face-lift to EU's trade protection rules arguing that the global economy has changed since the set of rules was last looked at in 1996.
The trade defence instruments are anti-dumping, anti-subsidy and safeguard measures, and all aimed at defending European producers against unfair competition and dramatic shifts in trade flows.
