Here There Be Dragons? Analysis of the Consequences of Granting Market Economy Status to China

Abstract

European Union (EU) industry has recently raised deep concerns about the potential negative consequences on the economy and employment of the EU granting Market Economy Status (MES) to China. This article leverages existing research on the economic impacts of Anti- Dumping (AD) and MES together with data on the evolution of AD action and trade, to explore the likely impacts of such a decision. We conclude that such impacts, although real, have been greatly exaggerated by detractors. MES is likely to reduce the number of AD cases taken against Chinese exports and the applied duty in cases that are investigated, which would indeed increase Chinese imports. However, in past cases of according MES, both in the EU and elsewhere, AD cases have continued and methodologies have been adapted to take account of the reality of such markets. Finally, Switzerland, a country which has never applied AD action to their imports, has not seen its market monopolized by Chinese imports, even in key sensitive sectors. In addition, prices of Chinese imports to that market are often higher than for low cost EU suppliers. Overall, only a few EU Member States will be affected and two industries – ceramics and steel – will be key to that impact, underlining the potential need for targeted support measures.