‘Difficult to predict’: German ambassador on China’s bid for market economy status with EU

PUBLISHED : Sunday, 10 January, 2016, 10:48pm
UPDATED : Monday, 11 January, 2016, 12:50am

Divisions among member states at home mean it is hard to predict whether the European Union will grant China market economy status, according to the German ambassador to China Michael Clauss.

Getting the approval of most members in the Council of the EU would not be enough to secure the status, Clauss warned, as the vote would be decided on a qualified majority basis.

Sixteen countries would need to give their assent and these countries must represent at least 65 per cent of the total EU population – meaning the vote of bigger countries such as Germany carry a disproportionate weight.

Even then there are some circumstances, depending on exactly which countries vote for and against, that could see China’s bid turned down.

The European Commission is expected to discuss the proposal in February or March, and Chinese economists say the increasing business and investment presence of China on the continent has improved Beijing’s bargaining position.

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“The European Commission has postponed its proposal on whether to grant [the status] several times. It may now be presented in February or March,” Clauss told the South China Morning Post.

“The adoption of the proposal would require a qualified majority in the Council of the EU, not just a simple majority of the 28 EU Member States. Many have difficult discussions at home. Then a majority in the European Parliament would have to confirm the decision.”

Media reports suggested that the United States warned the EU last month not to grant China the status amid speculation the European Commission planned to propose it as early as next month.

But EU nations are split on the issue. Britain and Belgium are supporters while Italy leads the opposition and Germany is yet to reveal its position.

“The European Parliament has a track record of very lively and contentious debates on free trade issues. So the outcome is difficult to predict,” Clauss said.

“As the largest member state with the biggest voting weight, Germany’s position will be of particular importance.

“During her visit to China last October Chancellor [Angela] Merkel discussed the issue with Premier Li Keqiang (李克強) and publicly stated that she would await the commission’s proposal first.”

Merkel had also underlined her expectation that China should accede to the World Trade Organisation’s General Procurement Agreement, Clauss said.

Much debate surrounds whether China should be recognised as a market economy.

Beijing has insisted that the status should come into effect automatically in December this year, according to the agreement for its entry into the WTO in 2001, but the EU has said China must first meet certain criteria.

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The market economy status would ease pressure for Chinese enterprises, such as in steel and solar power sectors, in anti-dumping disputes launched by overseas rivals and thus help them to avoid paying high punitive taxes on exports.

A decade ago, the Ministry of Commerce launched a quota to restrict its textile exports to the EU, a compromise in exchange for the EU’s promise on the market economy status. But, the gesture was in vain due to the global financial crisis and European debt crisis.

Chinese economists said China was no longer as concerned with market economy status as it once was, even though Beijing believed it was in a better negotiating position. Exports make up a smaller share of China’s economy and China also wants the advanced services sector to become a new engine for growth.

The need to keep exports stable was partly due to the need to stabilise employment, said Frank Tang, an economist with investment bank North Square Blue Oak. “The market economy status has been a tool for political game and bargain. And even if China obtains the market economy status, its competitors still have other ways to restrict its exports such as anti-subsidy probes and non-trade barriers such as national security and human rights requirement,” he said.

Renmin University professor Wang Yiwei said it was unfair to use the issue as a threat to China.

He added that China had its own cards to play – such as its interest in contributing to the EU’s 315 billion (HK$2.67 trillion) Juncker infrastructure investment plan, bilateral investment treaty talks, and its investment fund and loans for construction in eastern and central European countries.

“The significance of market economy status is not as great as before given China’s big role in the global market. It is not a life line for us,” Wang said.