Europe’s Dangerous Dance with China

European officials sidestepped a debate over whether to grant China more favorable trading terms Wednesday, opting instead to focus on other measures to combat unfair Chinese trade practices.

The European Commission, the executive body of the European Union, agreed to let China get “Market Economy Status,” which would give the country greater access to European markets for exports. But the commission proposed devising new ways to “maintain a strong defense system,” according to EurActive.com.

“Nobody believes that China is a market economy. The question is whether countries will bend to China’s political pressure.”

The European Parliament still must approve the proposal.

Terry Stewart, a trade lawyer in Washington, said it appears as though the European Commission intends to grant the change to China in name only — while continuing to take counter-measures against practices like dumping, in which Chinese firms sell products abroad for less than it costs to produce them.

“It sounds like it, basically, is something which is going to leave the system in place but do different things,” he said, adding that it would be little more than a “symbolic” victory for China.

China argues that getting Market Economy Status by the end of the year is guaranteed under the terms of the agreement under which it entered the World Trade Organization in 2001.

“That’s not the way the U.S. reads it,” Stewart said. “That’s not the way most countries read it. Nobody believes that China is a market economy. The question is whether countries will bend to China’s political pressure.”

Stewart said the WTO agreement required China to take a number of steps to transform its state-run economy. He said it followed through on some conditions — but not on many others. Critics contend China still manipulates its currency, provides export subsidies to businesses, and otherwise tilts the playing field away from foreign firms.

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Kevin Kearns, president of the U.S. Business and Industry Council, said any change in China’s current status would be detrimental.

“It sets a terrible precedent, because there’s no way China is a market economy. Period. End of story,” he said. “There’s no price-clearing method that would be the hallmark of a market economy. It just doesn’t meet the standard.”

Any capitulation to China reduces pressure on the Asian country to reform, Kearns said.

“Our trade laws are inadequate enough,” he said. “You give the Chinese an inch, they take a mile.”

Alan Tonelson, an economic policy analyst based in Washington, questioned whether the European Union could effectively counter unfair trade practices if China gets Market Economy Status.

“The reason that China wants Market Economy Status is that it makes these anti-dumping and anti-subsidy actions that much harder to prosecute,” he said.

Tonelson said any weakening of the E.U.’s resolve could make it harder for the United States to resist. And treating China as a market economy would have negative consequences for American businesses, he said.

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“It could certainly wind up giving China a green light” to keep up dumping — most notoriously of steel — and to extend the practice to other sectors of the economy.

Dan Celia, a nationally syndicated radio talk show host and the president and CEO of Financial Strategies Stewardship Ministries, said giving China Market Economy Status would be a “huge mistake for the Eurozone.” The United States would make a similar blunder if it followed suit, he said.

Celia said the Chinese government is under enormous pressure to expand exports because products have stacked up at the country’s ports, as production levels remained steady amid an international decline in demand amid a slowing global economy. Unleashing that excess supply in the United States would hurt the U.S. economy, he said.

“It’s going to create employment in China,” he said. “It’s going to create unemployment in the United States.”