EU Outlines Revamp of Tariff Methods as Deadline on China Nears

  • European Commission to seek end of blacklist in nod to Beijing
  • Plan will address EU industry concerns of market distortions

The European Commission said it would push before the end of the year to recognize China as a market economy in trade cases while pledging new investigative tools that would help keep tariffs on Chinese goods relatively high.

The commission, the European Union’s executive arm, said it would propose to abolish the non-market-economy label that the EU assigns to 15 countries including China when probing alleged below-cost -- or “dumped” -- imports. By itself, such a step would make it more difficult for European companies such as ArcelorMittal and Solarworld AG to win sufficiently high EU anti-dumping duties on imports from China.

To address political and industry concerns about a potential flood of cheap imports from China as Europe struggles to generate economic growth and jobs, the commission said it would also propose a special formula for calculating anti-dumping duties against countries whose markets are deemed to be distorted by state intervention. The balancing act is prompted by a December deadline under the provisions of China’s 2001 entry into the World Trade Organization.

“We are eliminating the existing list of non-market-economy countries,” EU Trade Commissioner Cecilia Malmstroem told reporters on Wednesday in Brussels. “We are creating an additional, non-standard methodology that takes into account the distortions provoked by state intervention in a given country or in a given sector. And this new methodology would lead to approximately the same level of anti-dumping duties.”

Dumping Cases

The plan marks an effort to address both a demand by Beijing for the EU to remove China from the bloc’s list of non-market-economy countries in dumping cases and growing worries in Europe about the threat posed to domestic manufacturers by Chinese exporters. China faces more European anti-dumping duties than any other country, while European industries such as steel and solar face sharper Chinese competition.

An alliance of more than 25 European industry associations, including a group representing steel producers, that opposes trade concessions for China expressed “cautious relief” on Wednesday at the commission’s plan to devise a special formula for determining anti-dumping duties against nations with distorted markets as a substitute for the list of non-market-economy countries.

Market-economy status for China would ensure the EU uses Chinese data for trade investigations affecting the country. The bloc currently uses other nations’ figures to calculate anti-dumping levies against China on the grounds that Chinese state intervention artificially lowers domestic prices and makes them an unreliable indicator of a good’s “normal value.” This practice results in higher EU duty rates against Chinese exporters and -- by extension -- more protection for European manufacturers.

China argues that the terms of its WTO accession require recognition of the country as a market economy in dumping cases beginning in December. In particular, Beijing is demanding the end of the EU practice of using other nations’ data to determine anti-dumping duties against China -- the so-called analogue-country model.

Under the agreement that led China to join the the Geneva-based WTO, the trade body’s members pledged to scrap in December 2016 a shortcut for applying a non-market economy standard in calculating anti-dumping duties against the country. At the same time, this development won’t grant China blanket status as a market economy.

The issue is so politically sensitive in the EU that it has put off until less than six months before the deadline a proposal for which the bloc has had 15 years to prepare. The commission held a top-level debate on the matter on Wednesday -- six months after an initial discussion -- and now plans to draft legislation that would need the support of EU governments and the European Parliament.

“This discussion now will be translated into a legislative proposal,” said Malmstroem, who didn’t specify when the measures would be presented later this year.

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