China repels EU allegations of export subsidies

A statement by the head of the EU Mission in Beijing, Markus Ederer, that the EU is not looking to start a trade war with China over dumping pricing or illegal subsidies, does not make good sense. His comments are contradictory to the fact that the Commission has launched aggressive investigations on two very important Chinese products sold in the EU, solar panels and steel. And all that despite the fact that trade between the two parties reached the spectacular level of €460 billion last year. Their commercial exchanges constitute the largest bilateral commercial relation in the world. Cases under investigation by the EU for dumping or illegal subsidies cover only 1% of that trade bonanza. Of course it is not only trade that matters in the EU-China relations. The two sides support huge investment flows and have vested interest in each-other’s soil of paramount importance. But let’s follow the facts over the two cases in question, steel and solar panels. On 6 September 2012 the European Commission introduced an anti-dumping investigation on imports of solar panels and components originating from China. As if this was not enough to disturb the EU-China relation, the European Union’s executive arm last week said that there are enough preliminary findings about illegal subsidies on Chinese steel export to the EU and the Commission is planning to levy punitive tariffs on those products. As it was expected, Beijing officials reacted strongly but not out of proportion. The port-parole of the Chinese Ministry of Commerce, Shen Danyang, stressed on Wednesday 16 January that this investigation by the Commission on Chinese steel producers is “unreasonable”. Of course the EU procedures take time and the application of punitive tariffs is not a simple decision by the Commission. Steel, like solar panels Until last week the most important EU Commission investigation over possible illegal subsidies or bumping pricing was in reference with the Chinese exports of solar panels. The European Sting had conducted an extensive investigation into the solar panel issue. The findings of this investigation are exposing that the European Commission uses arbitrary criteria conducting this investigation, while the timing also is absolutely questionable. According to the European Sting’s investigation, the whole affair of Chinese solar panels shows that the Commission’s decision to launch an anti-dumping investigation is quite arbitrary and unfair. It is interesting to follow at this point the Sting. On 30 December 2012 this newspaper wrote: “All along the years 2000s the installation of solar parks became a flourishing business and the European solar panel production was not enough to supply the exploding needs of the European markets. Imports from China were the obvious solution; given their competitive selling prices and the good quality…The arrangement worked perfectly for many years…Unfortunately all good things do not last forever. The EU countries, which had been paying extravagant subsidies to electricity production from solar energy, started having problems of fiscal deficits and had to rethink this haemorrhage. Even from late 2011 and early 2012 the Greek and the German governments started discussing deep cuts of those subsidies… The so abrupt cuts of the subsidies on electricity from solar energy, are expected to completely undermine the sector and create even more distortions…Investments and jobs in the internal solar panel production sector in Europe may collapse because of this sadden change of policy. Then it seems that the European Commission had this idea to create artificial impediments and if possible, block altogether the EU imports of Chinese solar panels. In this way, what will be left of the business of solar park construction will forcefully turn to the more expensive and uncompetitive home production of panels…” Same method It seems however that the conclusions from this story with the Chinese solar panels and the European debt crisis apply also to steel products. All along the first decade of the new Millennium and mainly after the introduction of the euro in its physical form, the European Union had an unseen before long growth period. Even the Greek economy at the time was expanding with GDP rates of 5% to 6% annually. As in the solar panel case, though, all those good things have an end. The same happened with the EU growth era. All along the good times Europe could not produce the quantities of steel it needed. So the EU found a very good solution with the quality and competitive price of Chinese steel exports. Now, that the EU economy is in recession and the steel products are not in high demand internally, EU producers of steel are incapable of competing with the Chinese firms. The growth times when everybody could sell their products have passed. As a result, the internal EU steel sector is threatened and many jobs are at stake. Again the European Commission is about to make the Chinese pay for the European recession and the salvation of thousands of jobs in the European steel sector, instead of taking action to enhance internal growth. This is neither fair nor just. And more so at a time when the Chinese leadership, recognising the difficulties of Europe, has repeatedly supported with statements and loans the EU efforts to counter its sovereign debt crisis and recession. The European Commission has better to rethink those two affairs, solar panels and steel, and reshape its policies towards a just and mutually fair relation with its strategic economic partner, China.