The EU on Wednesday said granting market economy status for China at the World Trade Organization was "untenable" due to the loss of jobs it would cost Europe in key industries such as steel.

The European Commission, the EU's executive arm, has given itself until this summer to decide on whether to grant China the designation that would make it much harder for major economies to fight Beijing over alleged unfair trading practices.

China argues its 2001 deal to join the World Trade Organization dictates that from December 11 the WTO members must switch their designation.

But Commissioner Vytenis Andriukaitis, Lithuania's representative to the EU executive, told European lawmakers in Strasbourg that the Commission all but ruled out the option of granting China the status, given the consequences.

"Our analysis of this option so far and the feedback from many stakeholders show that it would involve a very high cost in terms of potential job losses in the European Union," Andriukaitis, who is officially health commissioner, told the MEPs.

"Even without the current climate of overcapacity, any such move would be untenable," he said, adding that the commission would discuss the issue again before this summer.

As an alternative, he said the EU was considering granting China the status only partially, which would leave special exceptions for threatened industries, a tactic adopted by the United States.

"This approach would help ensure that the dumping margins calculated would, for the most part, reflect the ongoing distortions in the Chinese economy more accurately," he said.

The issue has become extra sensitive amid a world steel crisis caused by overcapacity in China, the world' top steel producer.

China produces more than half of the globe's steel output and is accused of flooding the world market with oversupply sold at below cost in violation of global trade rules.

Approval of the commission's decision is required by the European Parliament as well as the EU's 28 member states .

MEP's on Tuesday staunchly opposed granting the status to China, insisting that the EU needed as many tools as possible to fight off what they said were unfair trade practices by Beijing.

"The most important question is not whether we should yes or no give China market economy status, but jobs," said David Caspary, MEP from the right-of-centre EPP group, the biggest party in parliament.

"We do have a strategic partnership with China, but we should be able to defend ourselves," he said.