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04/12/2016

Steel industry worried it will be ‘collateral damage’ of EU’s China policy

Trade & Society

Steel industry worried it will be ‘collateral damage’ of EU’s China policy

Steel wholesaler. Dogguan, China.

[Cory Doctorow/Flickr]

European steel is worried that the EU will grant China Market Economy Status, sacrificing the industry in return for billions of Chinese investment to revive the bloc’s sluggish economy.

China is ‘dumping’ huge amounts of steel at artificially low prices on global market, worsening the steel crisis that threatens thousands of jobs across the EU.

The country makes about 400 million more tonnes of steel than it needs every year. The EU has seen a 120% surge in Chinese imports since 2013. 7,000 steelworkers have lost their jobs across Europe since the autumn, according to EUROFER, the European Steel association. Since 2008, more than 85,000 jobs have been cut.

The European Commission announced plans last month to speed up trade defence cases against cheap imports from China and urged member states to stop blocking measures that could set higher duties against dumped and subsidised products.

Brussels urges member states to regulate Chinese steel imports

The European Commission announced plans on Wednesday (16 March) to speed up trade defence cases against cheap imports from China and urged EU member states to stop blocking measures that could set higher duties against dumped and subsidised products.

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But that is not enough, steelworkers say. They fear the EU will grant China market economy status (MES) at the end of the year as it desperately seeks to secure Chinese cash for its €315 billion flagship investment plan, which aims to kick-start growth in the region.

MES will make it far more difficult to deploy trade defence instruments to protect the industry against cheap Chinese imports.

MES in return of cash for investment

Geert Van Poelvoorde, president of EUROFER, which represents all the steel production in the EU, said yesterday (21 April) he was worried that the huge amounts of Chinese investment would influence the decision.

“We keep saying that market economy status would be devastating for the steel industry and for other industries,” he said, stressing that the industry is concerned it will be considered ‘collateral damage’ by the Commission.

EurActiv.com reported that the European Commission and China have concluded technical work allowing Beijing to start pouring up to €10 billion under the so-called Juncker Plan.

Brussels clears way for China to pour billions into Juncker Plan

The European Commission and China have concluded technical work allowing Beijing to start pouring up to €10 billion under the so-called Juncker Plan, EurActiv.com has learned.

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After months of talks between the two sides, the EU and Chinese authorities have agreed that Beijing will contribute to the European Fund for Strategic Investments (EFSI) via its Silk Road Fund, a public fund.

Meanwhile, the European Commission is expected to put forward a proposal on whether to grant market economy status to China by the summer. It must be agreed by EU governments and MEPs before taking effect.

Beijing argues it is due the status, which will make it much more difficult to take anti-dumping measures against cheap imports, 15 years after joining the World Trade Organisation.

However, China is fulfilling just one of the five criteria set by the EU in order to define a market economy.

“In no way China can be considered a market economy,” added Van Poelvoorde.

Speaking at the European Steel Day on Thursday (21 April), centre-right MEP Alessia Mosca said an eventual grant would have serious consequences for a number of key European sectors.

She added that the EU should be ready to cooperate with the other partners in a similar situation, such as the United States, and to come up with a common solution that should be consistent with its WTO obligation.

A number of options were presented earlier this year, but before the Commission releases the results of its impact assessment, it is difficult to have a clear picture on the way forward.

A public consultation closed on Wednesday (20 April) and the EU executive is currently analysing submissions in order to prepare a high level conference in June to test a few ideas and come up with a final proposal in July, at the earliest.

Granting China MES very unlikely under current circumstances

The issue of granting Market Economy Status to China has started belatedly and has not taken into account the wide-ranging needs of the EU. However, there is scope to rectify this and the European Parliament is playing an active role in the decision-making process, writes Alessia Maria Mosca.

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Britain, France and Germany are among the countries to have asked the Commission to help the steel industry, which is suffering from an import surge from China and collapsing prices.

Nationalisation not an option

Tata Steel has blamed Chinese dumping for the sell-off of its British plants, which the government may have to nationalise.

The UK government announced on Thursday (21 April) that it is willing to take a 25% stake in any rescue of Tata Steel’s UK operations.

But Van Poelvoorde said, “We are very clear on this, in a European market economy, you cannot nationalise. When you start doing this you throw away your whole market economy principles.”

The European Commission has raised tariffs on some Chinese steel products because the prices are so low it is unfair competition for European steel.

It is investigating other Chinese steel products flooding the market, but Van Poelvoorde said he wanted the probe extended to cover all Chinese imports.

“Of course there are sectors that think that cheap steel is a solution,” he said, “but what happens if China stops exporting?”

Communist-ruled China is recognised as a market economy by Russia, Brazil, New Zealand, Switzerland and Australia, with whom Beijing has struck FTAs.

China has all the potential to become more an opportunity than a threat for the European production, Mosca told EurActiv in a recent opinion piece.

“But of prime importance is the maintenance of a mutual understanding of the commercial dynamics that cannot in any way be detrimental to European’s interests and productions,” she added.

China’s new move

On Thursday, China reportedly said it will do more to help its firms shift capacity overseas while keeping tight control on adding new capacity at home.

Reuters reported that a joint statement issued by the central bank and several other government bodies on Thursday said China would “strengthen financing support for enterprises ‘going out'”, and use loans, export credits and project financing to encourage coal and steel businesses to build capacity abroad.

“I am cautious about China’s move to shift overcapacity overseas as this doesn’t help, and just replaces exports,” said Jiang Feitao, a steel researcher with the China Academy of Social Sciences told Reuters.