China: Market Economy Status - Question

– in the House of Lords at 2:36 pm on 9th May 2016.

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Photo of Baroness Falkner of Margravine Baroness Falkner of Margravine Chair, EU Financial Affairs Sub-Committee, Chair, EU Financial Affairs Sub-Committee 2:36 pm, 9th May 2016

To ask Her Majesty’s Government what is their policy on the European Union granting market economy status to China.

Photo of Lord Price Lord Price The Minister of State, Foreign and Commonwealth Office, The Minister of State, Department for Business, Innovation and Skills

I thank the noble Baroness for her Question. The Government believe it is important that WTO members meet their obligations. China’s 2001 protocol of accession to the WTO removes certain provisions after 15 years, so countries may need to grant China market economy status when conducting anti-dumping investigations. We recognise there are real concerns about this. We are committed to discussing implementation of the protocol’s requirements with our international partners and look forward to the European Commission’s proposals in this area.

Photo of Baroness Falkner of Margravine Baroness Falkner of Margravine Chair, EU Financial Affairs Sub-Committee, Chair, EU Financial Affairs Sub-Committee

I welcome the Minister to his role. He will be aware that several studies show that if China were granted market economy status, it could reduce Europe’s GDP by 1% to 2% and reduce total output by up to €220 billion per annum. It is not a straightforward matter. I suggest to the Minister that he is legally allowed, under Article 15(d) of China’s WTO accession plan, to put the onus on Chinese manufacturers to prove that they do not benefit from state aid or manipulation of currency policy. When he is having discussions with other EU member states, will he suggest to them that this compromise is perhaps the way forward, rather than kowtowing to the Chinese Government in a self-defeating way for British manufacturing and jobs?

Photo of Lord Price Lord Price The Minister of State, Foreign and Commonwealth Office, The Minister of State, Department for Business, Innovation and Skills

I thank the noble Baroness for her suggestion. There are a number of things we are doing as this process moves through. First, as your Lordships know, the EU is looking at the legal position with Article 15 and we continue to assess that and have discussions with countries that have not yet agreed the protocol with China. Secondly, a piece of work by the Commission will assess the impacts and when we receive that, we will know what position we are actually in. Thirdly, we are discussing a number of mitigations in the event that we find the impacts unfavourable. So a number of things are in train, both legally and in terms of mitigations, to make sure that our position is one where we trade fairly with China.

Photo of Baroness Armstrong of Hill Top Baroness Armstrong of Hill Top Labour

In welcoming the Minister to his position, I wonder whether he would like to comment on the potential effect on the north-east, which is the only region in the country to have a positive balance of trade, because of manufacturing. What effect does he think the suggestion yesterday that we can prosper outside the single market would have on the north-east of England?

Photo of Lord Price Lord Price The Minister of State, Foreign and Commonwealth Office, The Minister of State, Department for Business, Innovation and Skills

I thank the noble Baroness for her question about the EU and the north-east. The Government believe that the country is far stronger inside the EU than outside it, for a whole host of reasons, which have now been well documented by the Prime Minister and others.

Photo of Lord Howell of Guildford Lord Howell of Guildford Conservative

My Lords, I congratulate my noble friend on his new post but is he aware that although EU-China trade has been growing, particularly in goods, in fact the Commonwealth’s trade with China has increased by 14 times since 2000? The pattern is one of growth all round but the weak point is inward investment into China, which has fallen quite sharply, and of course services to China, where we have considerable difficulty. Since we are an 80% service economy, it is really in our interest to expand that side, particularly given that the EU services single market is not very active and quite difficult to get into.

Photo of Lord Price Lord Price The Minister of State, Foreign and Commonwealth Office, The Minister of State, Department for Business, Innovation and Skills

My noble friend is right that it would be good to see the United Kingdom exporting more services to China. The good news is that we have now moved to number four with China in our goods exports, and China is currently the seventh-largest market for our goods and services exports. However, we believe that as the Chinese economy develops into more of a service economy, we will indeed be able to do more.

Photo of Baroness Hayter of Kentish Town Baroness Hayter of Kentish Town Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Cabinet Office), Shadow Spokesperson (Equalities and Women's Issues)

My Lords, first, I welcome the noble Lord to his new position, and on behalf of everyone, I think, I congratulate the new Mayor of London—London will play such an important role. Will the Minister welcome today’s relaunch of the “Stronger in” campaign? We look forward to working to make sure that we stay in the Union, for this and other agreements.

Photo of Lord Price Lord Price The Minister of State, Foreign and Commonwealth Office, The Minister of State, Department for Business, Innovation and Skills

The noble Baroness supports my own position: that the UK is stronger inside the EU. We have more trade agreements between the UK and the rest of the world than the United States and Canada together. We believe in free trade and, in our current position, we are best placed to access the world through free trade through the agreements that we have with the EU.

Photo of Baroness Stowell of Beeston Baroness Stowell of Beeston Leader of the House of Lords and Lord Privy Seal

My Lords, you need to help me out when this happens. I suggest that we hear briefly from the noble Lord, Lord Pearson, and then go back to the Conservative Benches.

Photo of Lord Pearson of Rannoch Lord Pearson of Rannoch UKIP

But my Lords, if we were not in the European Union, would we not be able to make our own free trade with China, as many smaller economies have done?

Photo of Lord Price Lord Price The Minister of State, Foreign and Commonwealth Office, The Minister of State, Department for Business, Innovation and Skills

The noble Lord is of course right that we would be able to do that. It is worth considering the fact, though, that Australia took 13 years to reach an agreement with China. It is not about just one or two agreements. I think we would have to negotiate the best part of 60 agreements at the moment, so it would be a considerable piece of work. It can of course be done but, through that period, there will be a time of uncertainty.

Photo of Lord Garel-Jones Lord Garel-Jones Conservative

My Lords, is this not just another example of important international decisions being taken in which Britain would have virtually no role to play whatsoever, were we to leave the European Union?

Photo of Lord Price Lord Price The Minister of State, Foreign and Commonwealth Office, The Minister of State, Department for Business, Innovation and Skills

The noble Lord is of course right. Being a member of the EU gives us the opportunity to take part in all kinds of discussions around the world on a whole range of topics.

Photo of Baroness Burt of Solihull Baroness Burt of Solihull Liberal Democrat Lords Spokesperson (Business, Innovation and Skills)

My Lords, I, too, welcome the Minister to his new position. There would be concern on all sides of the House if we allowed market economy status to China, until and unless the state stops interfering in market pricing. Does the Minister agree that we need the negotiating power of being part of the largest market in the world to get a better deal for Britain from China and other economies, too?

Photo of Lord Price Lord Price The Minister of State, Foreign and Commonwealth Office, The Minister of State, Department for Business, Innovation and Skills

The noble Baroness is right that being part of the EU gives us considerable weight when it comes to negotiations. On the MES point, we can certainly do a number of things. We need to look at the legal position in Europe and we will have a part to play in that. We also need to make sure that any mitigations we put in place—we are currently considering four—will have the desired impact. Where tariffs have been imposed, led by this Government, they have been successful in reducing imports, particularly in steel, which I know is of great concern to the House. Where that has been done, we have reduced imports by 90% and that has had the desired effect.