EU stuck in the middle as China chases MES

As a global society, we're obsessed by initials, but MES, the latest set, hides a serious dispute between East and West that's threatening to turn the old order upside down.

Let me try to explain. MES stands for market economy status, an economy in which investment, production and distribution are all driven by the demands of the market.

With me so far?

It's those three initials that hide a growing dispute between China and the United States, with the hapless European Union trapped in the middle.

The US has argued for years that China has not yet fulfilled the criteria to be granted formal MES, while China argues that, after it joined the World Trade Organization in 2001, it was accepted that MES would follow as a matter of course. In addition, Beijing argues that the market liberalization measures it has adopted in its transition from a centrally controlled economy to socialist market model means that the time has come.

The EU hasn't yet made up its mind, under pressure as it is from the US not to grant MES to China.

And that's where the United Kingdom steps into the picture.

As far back as 2004, the UK has indicated it would support China in its bid to gain MES.

And this is where it gets interesting. Ever since the dark days of World War II, the UK and the US have enjoyed a "special relationship", a phrase coined by wartime prime minister Winston Churchilll.

That means that, by and large, Britain has followed and been supportive of the US.

The re-emergence of China as an economic power on the world stage has meant a serious reappraisal in London of its ties with the US.

Don't forget, the UK and China go back a long way - some of it good, some of it bad. But the relationship has survived, and in the words of Chinese and British officials has entered a golden era.

Britain's pragmatic approach means, for example, that in 2015 the UK was the first Western power to become a founder member of the Asian Infrastructure Investment Bank, a Beijing initiative that is seen as vital to regional development and China's bold Belt and Road Initiative linking Asia and Europe.

The US was hugely put out, seeing the AIIB as a challenge to the World Bank, which it has controlled since its inception.

Now Britain has once again signaled it won't be bound by special ties by embracing the idea of China gaining MES in 2016.

Chancellor George Osborne's visit to China in the autumn sent a firm signal that the UK is behind China's bid to gain MES, whatever its old ally across the Atlantic felt. I wouldn't be surprised if a quiet deal has been struck - unwavering British support for Chinese MES in return for serious investment in key British industries.

The US, which I believe is inherently protectionist, blames cheaper Chinese products for the diminution of its car industry and the collapse of its once-huge steel industry. Until China gains MES, its products are still subject to huge anti-dumping fines.

The EU may well take a decision in 2016 - Germany's Angela Merkel has signaled clearly that she would give conditional support.

China's economy is on track to eventually overtake the US in the next few years, and that, I suspect, is what rankles in Washington.

Well, as they say here, get over it. Embrace reality and move forward.

The author is managing editor of China Daily Europe, based in London. Contact the writer at chris@mail.chinadailyuk.com