Yes to free trade - no to state subsidies

In December 2016 a couple of formulations in China’s protocol on accession with the WTO will be changed. China, in particular, believes that the change implies that the nation must now be regarded as a market economy by other members of the WTO in the context of international trade. Other WTO members, however, continue to maintain that China is not a market economy and must be treated accordingly when it comes to the prevention of subsidised exports. Irrespective of which interpretation is the correct one, this remains an issue that is to be decided by the WTO. Jernkontoret’s Mathias Ternell talks here about what is really at stake and the serious implications for industry in Europe. 

What does the debate on China’s market economy status really centre on?

The MES issue is not a question of free trade as some people believe; in actual fact it is a question of whether or not we should accept subsidised exports from China. Jernkontoret and the steel industry is definitely on the side of free trade but free trade can only function properly if it operates on the basis of equal conditions, i.e. without state subsidies and support.

Some people think that China is not dumping steel on the market, since the export prices are higher than the prices in the home market.

In a country that is not a market economy and where state subsidies occur then the prices are not set on the basis of market conditions. In such circumstances, to then use the home market price as a reference does not function since the calculation method is based on the principle that prices shall be set on the basis of commercial or market imperatives, without state subsidies. In such a context the home market price is irrelevant.

What would happen if the EU were to move before the WTO and, on its own initiative, recognise China as a market economy?

It is my firm belief that if the EU chooses to treat China as a market economy – when such is not the case – then we are in a position where the EU accepts state support in  China at the same time as we do not allow equivalent support for our own companies in Europe. To accept state support internationally and, at the same time, to prohibit the same in the Single Market is, in my opinion, a completely unacceptable approach. How will the EU’s companies be able to compete with Chinese companies under such conditions? Now it is the turn of steel companies and certain base industries to be hit. But soon other companies, further down the processing chain, will suffer likewise.

What is Jernkontoret doing to ensure that China is not accepted as a market economy?

We’re actively talking to politicians and other officials in both Stockholm and Brussels. We are also writing articles for publication on this subject and actively voicing our opinions on the radio etc. Moreover, on 15 February we shall be taking part in a large international demonstration in Brussels arranged by Eurofer (representing Europe’s steel industry as a whole) and others.

Contact:

Mathias Ternell
mathias.ternell@jernkontoret.se, +46 8 679 17 20