Brussels moves to strengthen China steel tariffs

Posted on November 8, 2016

Brussels is taking fresh steps to unblock resistance in EU member states to higher US-style duties on steel allegedly dumped in European markets by China.

The attempt to revive a long-delayed plan to toughen EU penalties on dumped steel comes as a deadline approaches for China to be treated as a market economy in trade disputes under World Trade Organisation rules — a prime political goal for Beijing.

The issue presents a political challenge for Cecilia Malmström, EU trade commissioner, who is trying to reconcile complaints that surging Chinese imports are to blame for collapsing steel prices with anxiety in some member states that a sharp rise in duties would be too protectionist.

Although the US has imposed a 266 per cent tariff on some steel products from China in 2015, the EU imposed a 21 per cent duty.

Jean-Claude Juncker, European Commission president, has suggested this is “naive” and called for higher duties. But there are concerns that Beijing could strike back with retaliatory duties against European companies that sell to or use raw material from China.

EU leaders resolved at a summit last month to settle the matter this year, saying an “urgent and balanced” agreement was required “to safeguard European jobs, ensure fair competition in open markets and preserve free trade”.

Still, it remains unclear whether a compromise can be brokered in coming weeks. A majority of member states wants to overhaul the regime but a blocking minority — including the UK, Sweden, the Netherlands, Finland and Denmark — has held out against change.

Some European officials believe this blocking minority is on the brink of collapse. However, there have been no firm indications from member states before EU trade ministers are due to discuss the issue on Friday.

Efforts to find agreement follow the near-collapse of Europe’s new trade pact with Canada. That raised doubts over the viability of EU trade policy and means that the push to clarify the treatment of China in trade disputes is being cast as another credibility test.

The move to fortify Europe’s trade defence is accompanied by calls for China to cut overcapacity, together with new grandfathering rights to pursue anti-dumping cases that are already in train.

Europe’s current anti-dumping regime is tied to a WTO protocol on China that expires next month, prompting anxiety within industry that EU markets could be flooded with ultra-cheap imports of products including steel if Beijing were treated the same as advanced economies in disputes.

In light of these concerns, Ms Malmstrom will unveil draft laws on Wednesday that would replace the system under which Brussels uses separate rules to investigate alleged dumping by advanced or non-market economy WTO members.

All WTO member states would be treated equally under new rules but the European Commission would have the power to prepare reports setting out any “unsuitable” production costs or export prices when investigating alleged dumping.

The objective would be to assess the extent of state influence in manufacturing in countries such as China. Means of keeping prices low that were deemed artificial could be taken into account when applying trade penalties.

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