Steelmakers Brace for EU-China Trade Proposal: Brussels BeatBy
European Commission to seek overhaul of tariff calculations
After 15 years, EU is acting under pressure of a WTO deadline
For China, it’s a question of respect. For some European Union manufacturers, it’s a matter of survival. And for EU policymakers, it’s one of the hottest political potatoes around.
The European Commission in Brussels is set to propose legislation on Wednesday affecting billions of euros in Chinese exports to the EU. The goal is to meet demands by China for equal treatment in trade cases and to assure EU companies such as steelmaker ArcelorMittal and solar-panel producer Solarworld AG that import tariffs are high enough to protect them from Chinese competitors.
China is demanding that it be designated a market economy, which could lower EU tariffs on imports by changing the way the levies are calculated. Steel, solar-panel and other European manufacturers, struggling to compete against aggressive Chinese rivals, rely on tariffs designed to counter imports sold below cost, a practice known as dumping.
In some cases the trade protection appears to be working. ArcelorMittal, the top steel producer in Europe and the U.S., said earlier this year that prices recovered in those regions after trade measures were introduced, and the company reported its best quarterly profit since 2011.
ArcelorMittal traded at 6.07 euros per share at 9:45 a.m. in Amsterdam, up more than 100 percent from the start of the year, according to data compiled by Bloomberg.
While it’s the EU’s No. 2 trade partner after the U.S., China is grouped with the likes of Belarus, Kazakhstan and Mongolia in lacking market-economy designation by Europe and faces more European anti-dumping duties than any other country. Examples of the roughly 60 Chinese products on which the EU applies such levies are:
- stainless steel
- solar panels
- aluminum foil
- office-file fasteners
- hand trucks
The political and policy challenges are so fraught with pitfalls that the commission, the 28-nation EU’s executive arm, has put off something it has had 15 years to prepare for until a month before a World Trade Organization deadline.
Steel is a flash point because China accounts for about half of worldwide production of the metal and the European industry, besides being the focus of the 1950s’ integration push that paved the way for the creation of the EU, employs about 328,000 people and accounts for around 1.3 percent of the bloc’s gross domestic product.
In a report early this year, the commission said more than 234,000 jobs in the EU were linked to the production of goods protected by European anti-dumping duties against China. Of those jobs, 55,000 were in steel, second only to ceramics with 102,600.
Led on this matter by EU trade chief Cecilia Malmstroem, the commission will try to please both sides.
On the one hand, it intends to propose abolishing the non-market-economy label that the EU assigns to 15 countries including China when probing alleged dumped imports. That would be a political prize for Beijing.
On the other, the commission aims to draw up a special formula for calculating anti-dumping duties against countries whose markets are deemed to be distorted by state intervention. That’s meant to allow EU anti-dumping levies on Chinese products to stay at around current levels, addressing political and industry concerns in Europe about a potential flood of cheap imports from China as the bloc struggles to generate economic growth and jobs.
The commission’s draft legislation will ultimately need the support of EU governments and the European Parliament. Don’t expect them to act by the Dec. 11 WTO deadline on market-economy status for China or even to ensure smooth sailing for the proposal.
A separate commission initiative from 2013 that would, in certain instances, eliminate a self-imposed EU cap on anti-dumping duties has stalled as a result of a deadlock between free-trade member countries (including the U.K.) and more protectionist ones. While Britain’s planned exit from the EU could deprive the opponents of the blocking clout they have wielded over this measure, few expect the U.K. government to abandon its import-friendly allies in Europe at this early stage in the Brexit process.
The latest outline of the political battle lines in the EU will come on Friday, when the bloc’s trade ministers meet in Brussels to discuss the upcoming draft law on the market-economy label and the deadlocked proposal from 2013 on the duty cap.
If you thought the ministers’ recent troubles in sealing the EU’s trade agreement with Canada were tough, you haven’t seen anything yet.