In Unilateral Grant of Market Economy Status to China Would Put Millions of EU Jobs at Risk, EPI Director of Trade and Manufacturing Research Robert E. Scott and Xiao Jiang, an assistant professor at Denison University, estimate that a unilateral decision to grant market economy status (MES) to China would increase manufactured imports from China by 25–50 percent, therefore putting 1.7–3.5 million European Union jobs at risk.
“An EU decision to grant market economy status to China will raise pressure on the United States and other countries to follow suit, with disastrous consequences for industries like steel, paper, glass, ceramics, and auto parts,” said Scott. “Before granting China market economy status, the EU would be well-advised to consider how many billions of euros of output and millions of jobs this decision could cost.”
Between 779,300 and 1,558,700 jobs in the manufacturing industry would be eliminated by granting MES to China. This represents the largest number of jobs at risk of any major industry, with the largest manufacturing job losses occurring in textiles and apparel.
The decision would also put 2.7 million jobs in highly import-sensitive industries at risk, meaning the total job losses could easily exceed 3.5 million. These at-risk industries include motor vehicle parts (with 1.2 million jobs at risk), paper and paper products, steel, ceramics, glass, aluminum, and bicycles and parts.
“China has extensively subsidized a range of industries and used currency manipulation to support production and exports in , allowing it to accumulate widespread gluts of goods that it can export at discount prices,” said Scott. “Granting market economy status to China would harm producers of these goods in the EU, United States, and other countries by exposing them to a flood of cheap Chinese products.”
Granting MES to China would make it more difficult to enforce anti-dumping laws in the EU and other countries by requiring the EU to measure the value of Chinese exports based on costs and prices in the Chinese market, which are artificially depressed by extensive government subsidies to raw materials and other inputs, and by its controls over the economy and finance. Anti-dumping laws make it illegal for exports to be sold in other countries for less than their fair value, which generally means the prices charged for them in their home market. When China joined the World Trade Organization (WTO) in 2001, it joined under terms that allowed other WTO members to ignore Chinese prices and costs in anti-dumping cases and instead use external benchmarks when calculating dumping margins. This results in much higher duties on Chinese imports than would prevail if China were treated as a market economy. Because of a clause in the original 2001 agreement, the EU is considering unilaterally granting MES to China in 2016.