Time to break free of protectionist shackles

An employee welds the exterior of a vehicle along a production line at a factory in Qingdao, Shandong province. [Photo/Agencies]

The overwhelming-majority vote in the European Parliament recently against granting China market economy status was not made on a reasonable basis and doing so will not bring benefits to the European Union.

Whether or not to give China the market economy status treatment is not an issue concerning whether China has met market economic standards unilaterally set by the EU, but an issue concerning whether the EU honors its commitment or not.

According to the accession articles China signed on entry to the World Trade Organization 15 years ago, China should be automatically granted market economy status in December this year. Such an article is unconditional and means that WTO members should abandon the surrogate country approach used in the past for anti-dumping investigations against China. Any investigation should instead be based on product prices or production costs in China itself.

Aside from the long-term negative effects produced by the protectionist effort to avoid industrial competition, the European Parliament's refusal to grant China market economy treatment will not have favorable short-term effects on the bloc's industrial development. In a passed resolution, the European Parliament pointed out that 56 of the anti-dumping measures the EU is taking are targeted at imports from China, covering both traditional labor-intensive manufacturing and such capital and technology-intensive manufacturing as steel products. It is exactly such an announcement that has made protectionists in the EU lobby for not granting China market economy status so that they can say "no" to "made in China" brands as a means of job protection.

Some in the EU should know that while exporting products to the rest of the world, China is also the world's leading market for imports and its growth in imports is among the fastest of world's major economies either in trade in goods or in trade in services. China's import volume denominated in the US dollar suffered a 14.1 percent decline year-on-year in 2015, bigger than the 13.4 percent decline in the import volume of the EU, but this was mainly a result of the drastic drop in prices of the primary commodities China heavily imports. China's imports of manufactured goods from the United States and European countries still enjoy huge potential for growth.

Following the European Parliament's recommendation will do no good to the struggling EU economy, given that encouraging trade protectionism will do nothing but worsen the EU's industrial environment. There were some countries in the past that did succeed in realizing the development of some infant industries through protectionist industrial policies. However, what the European Parliament's resolution tried to protect is not high-tech pioneering sectors, but such traditional sectors as steel that have already experienced their golden period and now enjoy no development potential. Interest groups dominating these out-of-date and weakly-founded industries do not focus their attention on how to raise their efficiency, but instead think how to maintain previous protectionist measures to lengthen their survival. Such attempts offer no hope for the future of EU industry and on the contrary add to its cost burden. What the EU should do is to inject new vitality into its economy.

The protectionism of interest groups has shackled the EU's economic vitality. It is exactly trade protectionism that has put the eurozone economy at a disadvantageous position in its competition with other developed economies, and caused the continuous decline of its economic proportion in the world's total GDP. Of the EU members, the countries advocating liberal trade such as the United Kingdom, the Netherlands and Belgium, support granting China market economy status and they have also achieved a better economic performance than the eurozone as a whole. France, Italy and Spain who are opposed to granting China market economy status, however, have performed worse than the eurozone's average performance

Europe should know that the development and buildup of interest groups, a byproduct of a country or region's economic prosperity, will suffocate the vigor of its innovation and continuous growth, and only by smashing the shackles imposed by these groups can it achieve sustainable development.

The author is a researcher at the Ministry of Commerce's International Trade and Economic Cooperation Institute.