The Strategist

EU Can Lose 3.5 Million Jobs Because of China

09/18/2015 - 15:03

The European Union may lose up to 3.5 million jobs if it lift trade protection measures against China, what Beijing expects by the end of 2016, according to a recent study of 25 European industrial organizations.

Friends of Europe via flickr
Friends of Europe via flickr
The report, submitted to senior EU officials and lawmakers this week, forecasts that EU imports of manufactured goods will grow by 25-50% over the next three years.

- This is another 5-10% growth per year in addition to the already existing trend. China is able to export much more, given its excess capacity, - says one of the study's authors Robert Scott, director of the Economic Policy Institute.

The European Union, together with other member countries of the World Trade Organization (WTO) must determine whether to grant China market economy status at the end of 2016.

WTO admits that when China joined the organization in 2001, local prices were not determined by market forces, but it was expected that Beijing limit the control over the economy 15 years later.

The status of market economy is very important because once it has been granted, it reduces the EU’s ability to impose anti-dumping tariffs on imports from China. This can happen if the Chinese export prices are lower than domestic prices, which are already keen.

Opponents, such as Aegis Europe (a group of 25 European industrial associations - from steel to ceramic industry), say that Chinese prices are not determined by market forces, and are artificially reduced.

Scott says that the low trading fees and reducing the threat of anti-dumping legislation will force Chinese companies to cut their prices on the goods export by almost 30%.

The consequent reduction in EU production will be 1-2% of the economic bloc’s GDP, what would lead to a reduction of 1.7 - 3.5 million jobs.

The report notes that sectors such as auto parts, steel, ceramic, pulp and paper, glass, aluminum industries are under grave threat. In general, these sectors employ 2.7 million people in the EU.

- There will be no sharp reduction in employment. However, some sectors are undoubtedly more vulnerable, such as the steel industry and the manufacture of bicycles, - says Scott. -Three, four, even five million jobs will be threatened if China is granted with the market economy status. Even if Europe decides to do it, it does not change the fact that China is not a market economy.