8 February 2016
By dumping products in the EU, China offloads overproduction, increases its market share and drives out competition. Chinese enterprises dump more products into Europe’s open market than any other country in the world. Indeed, 75% of all the EU's anti-dumping measures in force involve China. Furthermore, the EU is currently experiencing a rise in anti-circumvention proceedings where Chinese producers try to avoid anti-dumping measures illegally by exporting to Europe via third countries such as Taiwan and Malaysia.
Europe’s trade relationship with China is not balanced and is made worse by dumping. The trade deficit between the EU and China reached an all-time record high of €180 billion in 2015.
MES would severely undermine the effectiveness of the EU’s trade defence system and expose the EU market to effectively unrestricted Chinese dumping. Without effective anti-dumping measures the EU is only left with the anti-subsidy instrument, which has never been effective in the face of the distortions of the Chinese economy: it only allows action against very specific subsidies and not against the subsidies which are generally available in China. To make things worse, in addition to the opaqueness of Chinese subsidy regimes, the Chinese government has never complied with the WTO obligation to report subsidies, nor has it ever co-operated with the European Commission in anti-subsidy investigations. Accordingly, the average subsidy rate found in Chinese cases is negligible, and entirely inadequate in redressing injuries to EU industry, particularly SMEs, and easily absorbable by Chinese producers.
Washington has warned the EU against granting China MES, saying Chinese companies would flood European markets with unfairly traded, cheap goods. The US has also warned the EU about the consequences of granting MES unilaterally to China with regard to the impact on TTIP negotiations.
If the EU grants China MES before becoming a market economy there would be little incentive to reform, or stop dumping and illegal export subsidies. Chinese officials are trying to solve their domestic economic problems—including a massive property bubble, a collapsing stock market, and a slowing domestic economy—through more dumping and market manipulation. The country is, in effect, exporting its overcapacity and domestic economic problems abroad. Granting MES would remove the only means the EU has to prevent itself becoming a dumping ground for Chinese economic displacement.