How much is the EU really threatened by China’s steel “overcapacity” et al.?

(Credit: European Commission)

While the agreement between the EU and the US at the end of last month for a trade truce in steel and aluminum left a glimmer of hope for global trade normality, the 79 year old US President came to spoil the party with his uncovering statement: “These arrangements will … restrict access to our markets for dirty steel from countries like China and counter countries that dump steel on our markets”.

Biden also said that the deal’s aspiration is to “prove to the world that democracies — democracies — are taking on hard problems and delivering sound solutions. The EU and U.S. will continue to be the closest of friends and partners”. So, in lieu of celebrating the end of the Trump-caused trade frictions between the two blocs for the global economy to enjoy a more fruitful trade, it seems that the US aspire still and always to hurt global trade more than anything else. And of course, the EU side rushed to echo, as the Americanophile EU Trade Commissioner Valdis Dombrovskis added that the deal looks at “how to restrict market access for nonparticipants that do not meet … the conditions for market orientation, or that do not meet standards for low carbon intensity.” Did the EU and the US cut an agreement for a truce to launch a war, or what?

There seems to be some hype regarding China’s overcapacity in steel. But can 0.05% be considered overcapacity in the first place? China’s Ambassador to the EU Zhang Ming clarified the matter with hard data:

“During the 13th five-year plan, the production capacity of crude steel was decreased by over 150 million tons. Though China is a big steel producer, most steel products in our country are to satisfy our domestic demand. I can provide you with a set of data released by the World Steel Association. In 2020, China’s domestic steel output accounts for 56.7% of the world’s total, but our consumption also accounts for 56.2% of the world’s total. So there is a very small gap between these two numbers. In terms of export, in 2020, the export of China’s steel and aluminum products accounts for only 5% and 8% respectively of our domestic output. Such percentages are far lower than export-oriented countries.

In terms of China-EU trade, according to information released by the European Steel Association, Europe’s import from China, when it comes to steel products, has been on a steady decrease since 2017. In 2020, the total amount of imports only stood at 1.98 million tons, which was 48% lower than that in 2017. Though the EU’s import of steel products from China has been declining, its total import of steel does not. It means that the EU has been importing more steel products from other trading partners and that the import of steel remains a structural need for the EU.”

As per the above, overcapacity doesn’t seem to be the right word to describe the steel supply and demand of a country with 1.4 billion population being the second economy in the world.

The “overcapacity” hype though is not the only way for the EU and the US to try to hurt China but there is also the CO2 emissions argument that the steel industry produces, which is utilized as a tool of pressure towards China as well as the COP26. China’s Ambassador to the EU Zhang Ming recently said regarding China’s gradual step down from coal:

“When it comes to the carbon now floating in the atmosphere, 220 billion tons come from China’s emissions and 410 billion tons come from the US. But we have to bear in mind that China’s population is almost four times bigger than the United States”. Regarding China’s relevant position on the COP26 China’s top diplomat argued:

“There are claims that Chinese leaders’ absence from the COP26 is a mistake. I think some people have been out of the Paris Agreement for so long that they have little knowledge about the important progress made in the global fight against climate change with the support of China.

In 2015, China, the EU and the US, as important members of the international community, reached the Paris Agreement through cooperation. This was indeed very encouraging news. But not long after that, our friend from the US side decided to pull out of the agreement. Frankly speaking, US withdrawal from the Paris Agreement created a severe setback for our climate cause. We both spent the past few years in Brussels, so I think we can remember at that time how depressing and anxious the environment was in the city. I also remember clearly that later, at the 75th UN General Assembly, President Xi Jinping announced China’s 2030 and 2060 pledges and how Brussels was encouraged by it.

Since then, major economies of the international community have released their carbon peak and carbon neutrality goals. Our climate cause has once again picked up a strong pace. China has not been and will not be absent from global efforts against climate change. Our goals and road map are already set. And what we’re doing right now is to use concrete actions instead of empty talks to achieve our 2030 and 2060 goals. Lip service, shifting of blames and turning climate cause into a tool of confrontation for no reason are highly irresponsible actions that are also very harmful.”

Meanwhile, Mr. Frans Timmermans, the European Commission’s executive vice president for the European Green Deal supported China on the COP26, asking the world to not be too critical over China’s stance and instead understand the size of the country and economy and the need for a gradual step down form coal instead of an abrupt abolition.

And the rest of thorny issues…

At the same time, the Comprehensive Agreement on Investment (CAI) between China and the EU is still not ratified, while the EU aspires to explore trade options with Taiwan, violating the One China policy and thus touching one more sensitive issue of internal policy for China. Why does the EU likes to challenge these days the relationship with China?

Actually, where does it want to take this relationship to? Isn’t the fact the China has become EU’s biggest trading partner enough as a goal to maintain? There is no doubt that this is no accident but the fruit of hard work during the 46 years of China-EU relations. Then why?

It seems that these days the EU is being utilized by the US to act more as a colony or pawn of foreign affairs instead of the EU having a sovereign policy itself. If it hadn’t been the case, the EU would nurture the relationship with its biggest trading partner instead of inventing constantly frictions.

More so, the global political and economic order is in peril to go back to a dangerous Cold War look alike era. And all that, amidst the unprecedented pandemic that one would once hope that would bring the world closer and attached to multilateralism to resolve all issues peacefully.

Many random moves by the tiny “Lithuanias” of the world can move us easily and steadily to detrimental global trade wars or even wars. It is purposeful that the fact that the EU is a Nobel Peace Prize Laureate is proved again and again but for that the EU needs leadership and coordination.

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