It’s a divide and conquer strategy.
Remember that whole global debate over China’s market status? Well, it just took an interesting turn.
China has notified the World Trade Organization (WTO) that it intends to proceed with a panel request against the European Union (E.U.) over its current status as a non-market economy.
This wasn’t entirely unexpected, as China desperately wants to be named a market economy by both the E.U. and the United States. If China were granted market status, it would be much harder for the E.U. and the U.S. to take action against China’s ongoing trade cheating, particularly dumped imports.
But what is surprising is that the panel request China just filed is only for the E.U., not the United States. Specifically, it wants Europe to treat it equally with market economies in anti-dumping cases.
So why only Europe? Well, it appears China is betting that the E.U. is the easier opponent, and is employing a divide and conquer strategy.
Here’s the background: China contends that because it has been a member of the WTO for 15 years, it automatically has earned the right to be given market status. But the E.U. and U.S. have rejected that claim, and for good reason — China is simply not a market economy.
In the United States, there are six criteria that a country must meet before being granted market economy status. As we’ve repeatedly noted, China meets none of the six criteria.
The Obama administration denied China market status, with the Commerce Department noting that there are “serious imbalances in China’s state-directed economy… and significant state ownership in many industries and sectors.” The Trump administration is expected to maintain China’s current non-market economy status.
In December, China filed a WTO complaint against both the U.S. and the E.U. over its market status.
But now China is only moving ahead with the panel request against the European Union. AEGIS Europe, an alliance of 30 key industries in Europe, released an op-ed from spokesperson Milan Nitzschke on Monday that argues that the Chinese believe that it will be far easier to be granted market status by the E.U. compared to the United States.
And China is probably right, Nitzschke writes.
“This WTO panel request is a bit like Lance Armstrong suing the Tour de France in order to have doping be redefined as a medical treatment, and to get back all seven titles he won thanks to unfair competition,” Nitzschke writes. “But instead of immediately rejecting that claim and preparing a solid legal defence, the EU institutions are just rushing to change the Union’s anti-dumping legislation as soon as possible, to make it less efficient even before any WTO ruling from Geneva clarifies what the EU’s obligations actually are.”
He adds: “China first moves ahead with litigation against the weaker party which appears little interested in defending itself and ensuring the continued possibility of treating China as the non-market economy it is.”
If it ends up that the E.U. grants China market status but the United States and other nations do not, Europe will be placed at a huge disadvantage, as AEGIS notes.
Unfair Chinese imports have devastated entire industries in the United States. Tens of thousands of steelworkers have faced layoffs because of Chinese imports. The aluminum industry also has been left devastated because of unfair Chinese imports, forcing The Aluminum Association to file its first-ever trade case last week in an attempt to level the playing field.
But this is a global problem — and European industries also have faced layoffs and plant closures because of China’s continued dumping. We hope that the European Union stands up to China and fights to make sure it can defend itself against China’s trade cheating.