Czech ministry counts cost of China market economy status

One of the biggest trade issues to be addressed by the end of this year should be the status of China and whether it should be recognized as a full fledged functioning market economy. The Czech Republic appears to be taking a negative stance on the decision which needs to be taken along with other EU states. Prague’s main worry is the impact on jobs in sensitive industrial sectors.

Photo: CTK

China’s take on its 15 years in the World Trade Organisation is that it should now automatically qualify as a functioning market economy at the end of this year. That conclusion has some doubters, but the European Commission - which negotiates and pilots trade policy on behalf of the 28 member states - nonetheless feels obliged to take a stand on China’s status by the end of the year.

In practice China’s upgrade to a functioning market economy would mean that the European Union would have much reduced possibilities to protect its own market from Chinese exports of products at prices below manufacturing costs – so called dumping. At the moment the EU can slap on special duties and restrict the flow of such goods, but that possibility would largely vanish if market status was awarded.

And the Czech Ministry of Industry and Trade has attempted to work out what parts of the local economy would be most vulnerable to unprotected trade with China and put a figure on the job losses that might result.

Minister Jan Mládek revealed in a television interview on Sunday what the results of the survey were:

“Yes, we have worked on some estimates. We would like also though to see what the European Commission has to say about the results for the whole of Europe. In general terms, if China was recognized as a market economy by the end of the year then around 4,000 to 5,000 jobs would be at risk in the steel and ceramics sectors.”

Jan Mládek, photo: Filip Jandourek

The minister is still waiting for consultations with Czech employers and unions with regard to the negotiations on China’s status. While the labour unions are clearly against recognizing China as a market economy, the message from Czech companies is very mixed. Those that fear a flood of cheap imports are clearly also against the move, but those looking to protect their own export opportunities or business relations with the world’s second biggest economy often have other ideas.

But Jan Mládek said that Prague can at the moment only take one of two positions at the discussions with EU partners: either oppose market status for China outright or seek some concessions, such as the prolonging of existing anti-dumping duties, for at least another three to five years.

The European Commission is expected to decide its negotiating position in July. Last Thursday members of the European Parliament overwhelmingly voted against awarding China market economy status. The vote was interpreted as a clear signal which way it wants the Commission to go. Some lawmakers pointed out that almost four out of five EU anti-dumping measures are now taken against Chinese goods.