New chapters in EU-China trade disputes

Signature of the letter of intent regarding fighting counterfeiting in trade in alcoholic beverages by Zhi Shuping, Minister of the Administration of Quality Supervision, Inspection and Quarantine the People’s Republic of China (AQSIQ) on the right, and Dacian Cioloș, Member of the EC in charge of Agriculture and Rural Development on official visit to China on the left. EU Agricultural products are easy targets in trade disputes, due to the huge subsidies the EU pays to its farmers. China has already singled out the European wines as being heavily subsidised with public money. (EC Audiovisual Services, 23/07/2013).

This year there was no summer recess for the European Commission Directorate General for Trade (DG TRADE) and more precisely for the Directorate C which is competent for Asia. China kept the department’s bureaucrats busy all along this August, because on the 7th and the 16th of this month the Directorate produced two major cases on the trade relations with the Asian giant.

EU and China are two of the biggest traders in the world. China is now the Union’s second trading partner (after the United States) and the EU is China’s biggest trading partner. The value of their exchanges exceeds €1 billion a day while they invested at least €25bn at each other’s territory last year. Europe runs a deficit trade balance with China but it has a positive balance in services.

Steel tubes

The latest developments in EU’s trade relations with China came on the 16th of August. The European Union filed a request with the World Trade Organisation (WTO) to counter the Chinese antidumping duties on its steel tubes. In detail the EU asked the WTO to rule over a dispute concerning the Chinese antidumping duties imposed on imports of high-performance stainless steel seamless tubes (“HP-SSST”) from the EU. According to WTO procedures the Organisation will set up a Panel to examine the petition.

The relevant Press release published by the DG TRADE in mid – August 2013 says that the “EU exports of these tubes to China were worth some €90 million in 2009, but fell to under €20 million around the time when China imposed definitive anti-dumping duties in November 2012. Since then, the duties of 9.7% to 11.1% imposed on imports of steel tubes from the EU are significantly hampering access to the Chinese market”. On that occasion the EU Trade spokesman, John Clancy, had said “we are confident that the WTO will support our claims against these anti-dumping duties”. He had arguments to support this position but there is always the other side.

The case is not simple. The EU narrative is that China imposed the antidumping levy on steel tubes imported from the European Union and Japan, after the EU had applied a provisional anti-dumping duty on imports of certain seamless pipes and tubes of stainless steel originating in China. The EU’s request for the establishment of a WTO panel was to be discussed for the first time at the meeting of the WTO Dispute Settlement Body (DSB) of 30 August 2013. In view of that the EU feared that China might, under the dispute settlement rules of the WTO, object to the establishment of the panel. China however didn’t block it.

According to WTO the dispute settlement panel was actually decided on 30 August 2013. The relevant WTO report confirms that “China said that the imposition of the anti-dumping measure was consistent with its obligations under WTO rules…In order to allow the proceedings in the two disputes to be promptly harmonized, China agreed to the establishment of a panel…”. Obviously China didn’t want to avoid a swift settlement and the issue is bound to be resolved along the WTO procedures. The problem is that it remains to be clarified what will happen with the European antidumping duties on similar Chinese products.

Solar panels

Seemingly the trade disputes between the EU and China have no end. Chinese solar panel imports in the EU, due to the large economic content of this trade, have been for quite some time a friction point between the two trade superpowers. For months the Europeans were threatening these Chinese products with antidumping duties of up to 47.6%. The issue gained also widespread publicity because in China as well as in Europe producers are suffering from overproduction. In Germany the sector faces grave problems with the Conergy Group having already applied for bankruptcy. More German companies face existential problems (Q-cells, Bosch solar, Sovello, Odersun). The same is true for some major solar panel producers in China.

In view of the gravity of the whole affair the European Union agreed with China on 27 July 2013 to settle the issue ‘amicably’ and the two sides inked an agreement detailing their reciprocal obligations. Events however didn’t evolve quite that way. The European Sting followed very closely the whole story. On 9 August the Sting writer Dennis Kefalakos stressed that, {In an unexpected move the European Commission announced on Wednesday 7 August that it “…continues its anti-subsidy investigation on solar panels from China…”, and this only a few days after Commissioner Karel De Gucht, responsible for foreign trade had stated on 27 July that the issue had been concluded ‘amicably’ between Brussels and Beijing. In contrast to that De Gucht said that “in this case, the investigation will continue without provisional measures and the Commission will continue working actively on the case in order to arrive to definitive findings that are due at the end of this year”}.

In short nothing is settled between Europe and China as far as those two important products are concerned (steel tubes and solar panels). The fact is though that they represent only a very tiny part of the vast commercial exchanges between the two sides. Still those two products haunt the EU-China relations threatening also the huge direct investments the two sides plan to realise in each other’s territory.

Both sides however have expressed their strong commitment to settle their trade disputes along the lines of the WTO procedures. In no case Europe or China would take measures against each other to jeopardise their huge mutual interests. Jobs and incomes of thousands of people in both sides are at stake.