STRASBOURG (Reuters) - The European Union failed on Tuesday to agree on new rules to guard against cheap Chinese imports, sources said, in a sign that the bloc is yet to find an answer to one of its biggest challenges, the impact of globalization.

The European Commission, member states and EU lawmakers had intended to overcome their differences a day before Commission President Jean-Claude Juncker delivers his annual state of the union speech to the European Parliament.

But they failed to do so and no date has been set for another attempt, a parliamentary source said.

In his speech, Juncker is expected to address the issue of globalization, blamed by many for job losses and the rise of populist politicians. He could propose allowing the screening of foreign takeovers.

Central to the trade dispute is how to treat China.

The European Union and many of China’s other trading partners have debated whether to treat China as a “market economy”, which Beijing says was its right at the end of 2016, some 15 years after it joined the World Trade Organization.

Until now, China has been treated as a special “non-market” case, meaning EU investigators decide that its exports are artificially cheap if the prices are below those of a third country, such as the United States.

The European Commission, supported by the EU’s 28 member states, believes the rules for China must be changed and has proposed that for all WTO members, including China, dumping means selling for export at below domestic prices.

However, if those prices are subject to “significant market distortions”, investigators can instead construct a fair value using international benchmark prices.

Such distortions could include state interference, including state-owned enterprises, cheap financing or discrimination in favor of domestic producers.

Critics, which include many in the European Parliament, say the new rules shift the burden of proof from Chinese to EU producers, making it much harder to impose measures.

The European Parliament has said that if distortions are shown to exist in a given country then the onus should be on its exporters to show that their prices are market-conform.

“We won’t go down in history as the ones who opened our market to China while completely disregarding the possibly drastic consequences for European manufacturing and industry,” said Gianni Pittella, head of the center S&D grouping.