Steeling for China’s new status

And so it comes around again, the European Commission's occasional, passionately argued debate on whether the European Union should recognise China as a market economy, a status Beijing believes it has earned after 15 years in the World Trade Organisation.

Those in favour of granting the status to China say European consumers will benefit from cheaper Chinese imports, but one grouping of European manufacturing companies reckons it could lead to up to 3.5 million EU job losses if that status is granted.

It looks like the EU ayes will probably have it and China will be granted market economy status from December, but it will be a hard-fought battle, not least by the steel industry body Eurofer. It believes naming China a market economy would threaten nearly all the 330,000 jobs in Europe's steel sector despite any safeguards the EU might impose.

It is a particularly dire warning for Britain, where Europe's second-largest steelmaker, Tata Steel, has announced another 1,050 job cuts. Europe has lost about 85,000 steel jobs since 2008, more than 20 per cent of the sector's workforce, as steel prices collapsed to decade lows due to overcapacity, flagging demand and a flood of cheap imports, most of them from China.

Steel is expensive in the EU because of high energy costs and environmental taxes, whereas China, which makes half the world’s steel and has an overcapacity of about 400 million tonnes, has more than twice the EU’s total output. Its exports to the EU have doubled over the past 18 months.

Market economy status would make it harder for Europe to impose anti-dumping duties on cheap Chinese goods and would give trade a boost in an economy growing at its slowest rate in a quarter of a century. It would of course also be a major political win for China's ruling Communist Party. For the past eight years the EU has been kicking the issue into touch – its last report shared with China was in 2008 and there have been no consultations since 2011.

In an editorial, the official news agency Xinhua said it was “high time” Europe granted China full market economy status to China. “It is advisable for some of the EU members to dump the idea of resolving to labelling one of their top trading partners as a non-market economy for a bit of protection. [As] history tells, it is much wiser to continue opening up and practise free trade,” the editorial said.

While EU leaders have long sought to keep trade and rights separate when dealing with China, then basically ignore the human rights aspect entirely, certain high-profile public events, including the disappearing of three EU citizens in recent months before exacting what look like coerced confessions from them, are bound to start having an impact on trade ties.

Last week, the EU's ambassador to China, Hans Dietmar Schweisgut, told a news conference on trade and market access issues that the bloc was "deeply concerned" about the detention of EU citizens, after a Swedish activist was shown on TV giving a presumably coerced confession.

Peter Dahlin was working for an NGO and disappeared as part of a crackdown on human- rights lawyers.

“We do hope it’s not representing the new normal yet, but we do see an extremely worrying trend,” Schweisgut said. “We are concerned that this could have an impact on overall economic, business relations or academic exchanges,” adding that it “goes much further than human rights”.

The American Chamber of Commerce in China said more than three-quarters of its members felt less welcome in China than before, while its China Business Climate Survey report showed that US firms were also concerned with inconsistent and unclear applications of rules and laws, and rising labour costs.

US firms feel new laws such as rules restricting foreign NGOs, an anti-terrorism law and a national security law have muddied the waters, while respondents cited “inconsistent regulatory interpretation and unclear laws” as the top business challenge.

"While the Chinese leadership has emphasised that the country will follow the rule of law," James Zimmerman, chairman of AmCham, said in the report, "our members continue to report that the regulatory and judicial process are less than fair and lack adequate oversight."