Steel industry workers' demonstration outside Berlaymont in Brussels on February 23, 2016 / Andreas Liljeheden, Euranet Plus News Agency / CC BY-SA 2.0

Europe’s steel companies are on their knees, partly due to price dumping from China. They’ve call on the European Commission to impose higher duties on China, and to avoid granting China market economy status. But some argue that this would be illegal and could trigger a costly trade war.

The Chinese steel producers, supported by state subsidies, have been accused of dumping cheap products on the European market. In combination with high energy prices, European steel manufactures have not been able to cope with the increased competition, described as unfair.

“We have lost 85,000 jobs since 2009. 7,000 jobs have been lost just the last six months,” explained Axel Eggert, director general of the European Steel Association, EUROFER, in an interview with Euranet Plus.

The Chinese steel production has increased massively in the last 15 years and today the country produces almost five times the total output of the 28 EU member states – adding to the global overcapacity.

According to EUROFER, it’s about life and death of the European steel industry and the association calls on the European Commission and EU member states to take tougher action against China.

EU duty not enough

The EU Trade Commissioner Cecilia Malmström argues that she is using all the means possible to ensure that the EU’s trading partners play by the rules. The EU authority has currently a record level of ongoing investigations and measures in place. On February 12 this year, it started three new investigations, all concerning Chinese companies.

The Commission also imposed provisional anti-dumping duties on the basis of a “threat of injury” which was labeled as an exceptional preventive action. These duties range between 13.8 and 16 percent.

Parts of the European steel industry call this “a slap in the face.”

Eggert at EUROFER says it’s far from enough and he argues that the EU must ban a rule which suggests that also positive effects from dumping, for instance for consumers, are considered when decisions are taken on duties.

“You cannot apply duties of 10 or 15 percent if the dumping margin is 60 percent. Other countries, like the US, apply duties at the level of the full dumping margins, so 60 percent in that specific case,” Eggert said.

“The EU must therefore quickly adopt the lifting of the lesser duty rule in the Council where it is stuck right now”.

Just days after the Commission launched the new investigations, representatives from the steel industry protested outside the Commission head quarter, Berlaymont, calling for tougher measures.

Axel Eggert argues that if action is not taken swiftly, many more jobs will be lost, not only in the steel industry, which employs 330,000 Europeans, but also in other sectors dependant on steel such as construction and car manufacturing.

 Steel bench in Nantong, China, in 2015 / Flickr / Vlad Meytin / CC BY-NC-ND 2.0

Granting China MES “is still an open question”

Politicians demand action

Similar calls are made by European politicians. Emmanuel Macron, French minister responsible for industry, has written a letter to the Commission together with other ministers such as Germany’s Minister for Economic Affairs Sigmar Gabriel.

As Emmanuel Macron asked EU decision-makers to speed up the investigation process during a debate in the European Parliament on February 15, he was confronted by steel workers who feared that they will soon not be able to make a living for themselves and their families. (audio in French)

“We fight since two years, I tell you frankly if we cannot fix it, if you cannot fix it, then we are done, we will all die,” a protester told Euranet Plus.

“We should impose the anti-dumping procedures. We should act faster. We can impose provisional measures, that is, impose measures already when there is a problem,” Macron said, comparing the EU with the US.

“We can do it in two months. Today, we wait nine months. Why do I say that threat of injury is about two months? It’s what the Americans do. We should be at least as protective of our steel industries as the Americans. If not, we have a world that doesn’t work,” Macron said.

However, Lucia Caudet, industry spokesperson at the European Commission, argues that the EU authority has taken action using so-called trade defence instruments. And concerning speeding up the process, the problems lies with EU member states in the Council.

“There is the matter how quickly we can carry out investigations. That is a recurrent comment by industry, but also member states. There I should remind that we have a proposal, a legislative proposal from 2013 on the table, which is actually blocked in the Council, so there is progress possible there. And this proposal would allow us to carry out investigations more quickly,” Caudet said.

Chinese prices and international market

The Commission investigations in response to the Chinese dumping also depend to a great extent on the status of the Chinese economy. The EU is, together with other members of the World Trade Organisation (WTO), currently looking at granting China market economy status (MES).

Under the current agreement, China has a special status, which allows WTO members, such as the EU, to base anti-dumping duties on other prices than Chinese, as these are not considered to be determined by the market.

In practice, many of the European duties are based on American price levels, which are higher than in China.

Thus, the duties that top up the difference between the dumped price and the comparable price is higher than if China would have market economy status and be judged to have functioning market prices.

Granting China MES would be a disaster, according to the steel companies. Eggert at EUROFER argues that it would make all measures against China meaningless.

It would also have a major impact, not only on the steel industry, but on the overall European economy, according to a study made by the Economic Policy Institute, EPI. The trade deficit between EU and China would rise and put between 1,7 to 3,5 million European jobs at risk.

Steel frame in Shanghai in China in 2013 / Flickr / JERRYANG / CC BY-NC-ND 2.0

Shanghai never sleeps

Trade war if China is not given market status

Whether to grant China MES “is still an open question,” an EU official told Euranet Plus.

However, Peking argues that the EU is bound to give such a go-ahead by the end of the year, as this was agreed in the Protocol on the Accession of China to the WTO.

“It must be emphasised here that this provision was explicitly temporary and is due to expire after 15 years in December this year. Thereafter, trade with China will be governed by the same normal as that with any other WTO members,” said Yang Yanyi, ambassador at the Chinese representation to the EU when she addressed the European Parliament a month ago.

 

“#China has always maintained that the accession accords of the #WTO will automatically transform China into market…

Posted by Mission of China to the EU on Wednesday, February 17, 2016

Christofer Fjellner, member of the Committee for International Trade in the European Parliament, who has been leading the parliamentary negotiations on the Commission’s proposal on protection against dumped imports, shares the view of the Chinese ambassador.

He argues that the question is not whether China is a market economy or not. It only concerns how you calculate anti-dumping duties and there the WTO accession protocol is clear.

“Reading the text, its pretty naïve to think that you can go on as before, because that is plainly illegal,” Fjellner said in an interview with Euranet Plus.

Fjellner is certain that China will be granted MES eventually. But he thinks that a majority of EU member states and the Parliament will not want to grant MES to China now, which in turn could lead to a major and costly trade conflict.

“Tariffs, I think we will have a hard time negotiating an investment agreement between EU and China under these circumstances, so those negotiations probably have to be postponed,” Fellner said.

“A likely sector is the agriculture sector in Europe that has a clear surplus in exports to China, that might be hit by tariffs or actually by physio-sanitarian rules that makes it more or less impossible to export to China. We saw that in the trade conflict with have right now with Russia, for example.”

Fjellner also argues that no matter if China is granted MES or not, there will still be more than 30 percent overcapacity in the steel industry globally.

There will still be tough times for European producers who will have to do a lot of structural reforms.

  • Author: Andreas Liljeheden, Euranet Plus News Agency
  • Further image credits: (middle 1) Steel industry workers’ demonstration outside Berlaymont in Brussels on February 23, 2016 / Andreas Liljeheden, Euranet Plus News Agency / CC BY-SA 2.0 | (middle 2) Steel bench in Nantong, China, in 2015 / Flickr / Vlad Meytin / CC BY-NC-ND 2.0 | (middle 3) Steel frame in Shanghai in China in 2013 / Flickr / JERRYANG / CC BY-NC-ND 2.0 | (SoundCloud audio with French steelworkers) Manifestation contre la réforme, Marseille, France in 2010 / Flickr / marcovdz / CC BY-NC-ND 2.0

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