Robert E. Scott, Xiao Jiang — Unilateral Grant of Market Economy Status to China Would Put Millions of EU Jobs at Risk

The European Union is considering whether to formally recognize China as a “market economy,” a move that would fundamentally change the way EU countries handle dumped exports under the World Trade Organization (WTO). With some EU officials reportedly in favor of unilaterally granting market economy status (MES) to China—and with the United States and other countries set to debate the same question—it is useful to examine what the change would mean for the European economy and its workers. According to our analysis, an EU decision to unilaterally grant MES to China would put between 1.7 million and 3.5 million EU jobs at risk by curbing the ability to impose tariffs on dumped goods and thus allowing Chinese companies to undercut domestic production by flooding the EU with cheap goods. Specifically, we project that the increased imports arising from granting MES to China would reduce EU output by between €114.1 billion and €228 billion per year, a 1 percent to 2 percent reduction in EU GDP (relative to base year output in 2011) that translates into 1.7 to 3.5 million potential jobs lost among import-competing industries, their suppliers, and the companies that depend on the wages of displaced workers.

In addition to these direct and indirect jobs at risk, granting MES to China would put up to 2.7 million direct jobs at risk in a group of highly import-sensitive industries. The job losses estimated in this report are above and beyond jobs already lost due to rising EU trade deficits with China, and additional job displacement that will result from trend growth in bilateral trade deficits in the future. Already over the last decade and a half, EU imports from China increased nearly fivefold between 2000 and 2015, rising from €74.6 billion in 2000 to an estimated €359.6 billion in 2015, an increase of 11.1 percent per year.…

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Economic Policy Institute
Unilateral Grant of Market Economy Status to China Would Put Millions of EU Jobs at Risk
Robert E. Scott, Xiao Jiang