The EU risks trade relations with China over the Tata hype about steel

JEAN-CLAUDE JUNCKER STEEL

Visit by Jean-Claude Juncker, President of the EC, to Strasbourg, where he visits the Council of Europe. © European Union , 2016 / Source: EC – Audiovisual Service

 

It is indisputable that we are running a very important period regarding the trade relations between China and the EU. On the one hand, it is only today that the Commission’s online public consultation on future measures to prevent dumped imports from China is closing; a consultation which had earlier opened on 10 February. The EU is conducting this public dialogue to decide whether it will grant to China the Market Economy Status (MES) by the end of this year.

The Market Economy Status

In short, under Section 15 of the Chinese WTO Accession Protocol, China can be treated as a non-market economy (NME) in anti-dumping proceedings if Chinese firms cannot prove that they operate under market economy conditions. The main implication of NME status in anti-dumping proceedings is the possibility to use other methodologies to determine the normal value of the good, instead of using domestic prices to compute the dumping margin. In general, NME methodologies to calculate normal value have proven to lead to higher anti-dumping duties. In view of these higher duties, and the fact that China faces the highest number of anti-dumping investigations, obtaining earlier recognition of Market Economy Status (MES) has been one of the country’s major foreign policy objectives since 2003. Moreover, China has argued that, according to Section 15(d) of the WTO Accession Protocol, the Section 15 provision allowing for NME methodology expires after 11 December 2016, resulting in a legal obligation to grant MES to China after that date. This interpretation of the section remains highly controversial.

The steel issue

On the other hand, the EU ongoing debate regarding the antidumping rules towards China and the MES status of the country comes in a period where there is a big discussion about China’s steel production and its effect on the rest of the world. Only last Monday the OECD’s High-Level Symposium on Excess Capacity and Structural Adjustment in the Steel Sector took place in Brussels, where the major issues of the steel sector globally were addressed. The main topic discussed there was overcapacity, which combined with the reducing demand for steel around the world and its price tumble (40% decrease in the last two years), poses an imminent threat for the global economy. If one considers the millions of people who are working in the sector globally to cover a demand of 1,488 million tonnes in 2016 (already 0,8% less than 2015), steel remains a major issue threatening business profits and workers’ welfare.

The Tata hype

Only in Europe some 360,000 people work in the steel sector. Amidst a worrying climate about the impact of the sector on the global economy, Tata announced earlier this year that they will close down their steel production factory at Port Talbot in Wales. The factory is officially on sale now and some 4.000 jobs in the UK could be lost, although the exact number keeps changing in the news every week. Most importantly, Tata attributed their decision to shut down their operations in Wales to their bad turnover caused by cheap Chinese steel imported in the EU.

Juncker against China

The Tata case was an “opportunity” for the European business and policy-makers to intensify their campaigns against Chinese steel or even Chinese products as a whole. Exactly one week ago the President of the European Commission, Mr Jean-Claude Juncker, seized the “opportunity” in front of MEPs in Strasbourg. “The steel industry in Europe has problems. Problems we should take seriously. Steel isn’t any old industry. The steel industry is no longer just heavy industry, it is now high-tech industry”…“Steelworkers are highly skilled specialists and they deserve our unconditional support.” He then went on, targeting clearly China: “Free trade should be fair trade. We are now investigating steel products from China to determine whether they were dumped on the market and we will take other measures if necessary.” Like this, the former Premier of Luxembourg, the home of ArcelorMittal, which is a world pioneer in steel, gave the clear political message that the EU is getting ready to push the button against Chinese steel imports.

The EU already last March had announced their plans to confront the steel crisis in Europe and thus answer to the concerns of the European industry and policy makers. The plans include speeding up tariffs on import products that are “dumped” below market price level and increasing the ability to impose heavier duties on imported steel products. The EU also plans to create an alert mechanism to spot imported steel products that could potentially harm the interests of the EU producers.

The bigger picture instead

It is true that the steel sector faces some major challenges globally that all stakeholders need to commonly address and take action upon. However, the solution cannot be to shoot one’s leg. China, the world’s biggest steel producer, relies on its huge export strength to maintain the 6,5% to 7% growth in 2016, a rate that the entire world depends upon. Especially this year, that the Asian giant is facing short term economic turmoil and weakened internal demand. Pressing the button to release heavy tariffs against Chinese steel is a risky gamble that will have inescapably immediate repercussions to the world economy and the EU as well. Besides, China remains EU’s greatest trade partner.

On a separate note, Tata’s move to shut down the factory in Wales and attributing it to China’s steel imports can be misleading, as the Indian company has its own interests and responsibilities regarding their own operations in Europe. Hence, the Tata case should not float an unfair hype against Chinese steel. Most importantly, it should not interfere with the Market Economy Status that China seeks from the EU next December. Instead, a fair and balanced approach needs to be applied, which is in the interest of all parties concerned.

No room for protectionism in the year of the monkey

All in all, the world economy is undeniably shaky in 2016, the year of the monkey. It is in times like these that the problems of the economy should be discussed and resolved with a generous spirit that gives room for the bigger picture, rather than narrow protectionism. For the world and especially the EU economy to live by 2016 and return to prosperity thereafter, a balanced and wise global approach is required.

For instance, it is controversial to see Juncker’s investment plan asking for billions of euros of investment from China, due to the lack of investors inside the stagnant EU economy, and at the same time the EU to greatly jeopardise its strong trade bonds with the Asian giant.

The Sting will be following this primordial trade issue closely.

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

Stopping antimicrobial resistance would cost just USD 2 per person a year

Opening Remarks by H.E. Ambassador Yang Yanyi, Head of the Chinese Mission to the EU at the Chinese Fashion Night

FROM THE FIELD: South Sudan’s green shoots, highlight environmental recovery from war

European Commission determined to conclude EU-Mercosur trade deal this year despite French concerns

Refugee crisis: Commission proposes a new plan urging EU countries to help Italy

Rising insecurity in Central Africa Republic threatens wider region, Security Council told

PM May fosters chauvinism, declares trade war on Europe

Statement by Cecilia Malmström, Member of the EC in charge of Trade, on the successful conclusion of the final discussions on the EU-Japan Economic Partnership Agreement (EPA) – Brussels, 08 Dec 2017. (Copyright: European Union; Source: EC - Audiovisual Service; Photo: Georges Boulougouris)

The EU and Japan seal free trade pact that will cover 30% of global GDP

World Cancer Day: Early cervical cancer diagnosis could save lives of over 300,000 women

The ECB again takes care of the bankers not the people

MWC 2016 LIVE: Ingenu steps up efforts to build LPWA networks across the globe

The EU Commission by serving the banks offers poor support to European mainstream political parties

We know ethics should inform AI. But which ethics?

It’s ‘time for concrete action’ says UN chief, welcoming inter-Korean agreement

“Financial crisis will not happen in China!”, the Chinese Premier underlines from Switzerland; the Sting reports live from World Economic Forum 2015 in Davos

How will the NATO-EU competition evolve in the post Brexit era?

Third Facebook-Cambridge Analytica hearing: data breach prevention and cures

May led Britain to chaos, now looks for way out with unpredictable DUP

How can consumers be effectively protected from insurance sellers?

EU decides “in absentia” of civil society

New energy security framework will help meet growing needs in East Africa, sustainably – UN economic wing

Close to 7,000 evacuated from Syrian towns after enduring nearly 3-year siege

Chart of the day: The internet has a language diversity problem

Reality Shock

Intel @ European Business Summit 2014: Better decisions now, the new business dashboard 

EU, Brazil to hold high level Summit in Brasilia

UN says ‘many humanitarian achievements’, one year after ouster of ISIL from Mosul

Scientists can lead the fight against fake news

The sad plight of fledging doctors

IMF: All you want to know about Argentina

Vaccinations and the movement of anti-vaccers

Why we need a moderate approach to moderating online content

A Sting Exclusive: “Europe must be more ambitious in COP21 and lead on climate finance and sustainable development”, Green UK MEP Jean Lambert points out from Brussels

Confronting neo-mercantilism: why regulation is critical to global trade

How the powerful science of behaviour change can make us healthier

South Sudan’s foreseen genocide: from “Never Again” to “Again and Again and Again”?

Ukraine pays the price for lying between Russia and the EU

Breaking barriers between youth in the new tech era: is there an easy way through?

New roadmap toward healthier and cleaner oceans adopted by UN Environment and European Commission

This Chinese tech giant’s latest gadget is… a bus

Oh, well, you are wrong, Google responds to the European Commission

‘Favour dialogue’ over violence, UN chief urges all parties following clashes in Mali’s capital

COP21 Breaking News_03 December: UNFCCC Secretariat Launches Forest Information Hub

How music can help children with autism connect

Consumers suffer three defeats

Trump questions US – Europe kinship, approaches Russia

The European Sting @ Mobile World Congress 2014, Creating What’s Next for the World. Can EU Policy follow?

Here’s how to prepare South-East Asia’s young people for the future

What the global Internet’s stakeholders can learn from Europe’s new data law

In the future of work it’s jobs, not people, that will become redundant

Summer JADE Meeting 2015: We came curious, we left inspired

Women vital for ‘new paradigm’ in Africa’s Sahel region, Security Council hears

2016 crisis update: the year of the Red Fire Monkey burns the world’s markets down

Parliament: Last compromise on bank single resolution mechanism

Threats from mammoth banks and Brussels fuel May’s poll rates

Why Eurozone needs a bit more inflation

UN chief welcomes ‘first concrete step’ in normalizing Eritrea-Ethiopia relationship

Eurozone: In vicious cycle of disinflation and unemployment?

Guterres expresses ‘grave concern’ following explosion at large political rally for reform-minded Ethiopian Prime Minister

A few, or rather two, trade and economic alliances may rule our brave new world

UN gender agency hails record-breaking number of women in new US Congress as ‘historic victory’

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s