The timing of the demand for action is highly significant as Europe’s manufacturers fear that the European Commission will soon announce a proposal to recognise Beijing as a “market economy”. Such a designation would rob the EU of many of its powers to impose countervailing tariffs against unfairly cheap Chinese imports.
Europe’s steel industry has lost a fifth of its workforce since 2009 and demand remains 25 per cent below levels before the 2007-2008 financial crisis.
European steel industry executives have accused China of using its massive overcapacity at steel mills to dump products on the European market, selling them beneath the cost of production.
Officials from member states, meeting in Brussels on Monday, called for a “full and timely use of the full range of EU trade policy instruments to ensure a global level playing field”.
Trade policy is the exclusive competence of the commission, which determines tariffs and the terms of trade deals.
The steel industry’s decline, which has been highlighted by a spate of closures in the UK, cuts to the heart of a heated political debate on whether Brussels should award market economy status to China next year.
The debate hinges on the terms of China’s agreement of accession to the World Trade Organisation in 2001. Beijing interprets this accord to mean that it will automatically become a market economy at the end of 2016.
This has piled pressure on to both the US and EU to declare whether they agree with China’s interpretations of the rules. The decision is significant as it is very difficult to impose retaliatory tariffs against a market economy, whose price structures are, by definition, supposed to be set fairly.
The strongest resistance in Europe comes from traditional manufacturing industries, such as steel, garments and bicycles.
The steel industry globally is dogged by excess production capacity estimated at about 645m tonnes, of which experts believe some 300m is in China. That is despite the shutting of plants there capable of making nearly 80m tonnes.
China produced about half the world’s 1.67bn tonnes of steel output last year and is on track to export a record of more than 100m tonnes this year.
Monday’s call for the deployment of trade instruments offers an indication that the commission could run into strong opposition from member states if it pushed ahead with market economy status for China. The UK is in favour, while Italy is opposed. France and Germany have not disclosed their positions.
Community, the main steelworkers’ union in the UK, where more than 4,000 jobs have been lost since the summer, was unimpressed by Monday’s statement from the member states.
“Council ministers and the commission have clearly failed to grasp the urgency of the situation faced by the steel industry. Steelworkers whose jobs are at risk and who are seeing the impact of the dumping of cheap steel will take very little comfort from the conclusions of today’s meeting,” said Roy Rickhuss, general secretary.
“The summit also failed to give a proper view on the impact of China gaining market economy status, which will pose an existential threat to the European steel industry.”
The steel industry has also complained that EU environmental regulation is making it uncompetitive. In response, the member states called for greater consideration of exemptions from the EU’s cap-and-trade carbon market for threatened energy-guzzling industries such as steel.
writer : Christian Oliver and Michael Pooler
The Financial Times Limited
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