European Commission trade chief, Cecilia Malmström, will travel to Strasbourg on Tuesday (12 September) to seek an agreement with Parliament on new EU anti-dumping rules, but MEPs remain firm and refuse a ‘de facto’ recognition of Market Economy Status (MES) for China.
The EU executive has begun negotiations with national governments and MEPs in July on new rules to calculate import duties and curb unfair trading practices, especially from China.
“We won’t go down in history as the ones who opened our market to China while completely disregarding the possibly drastic consequences for European manufacturing and industry,” said Gianni Pittella, chairman of the Socialists and Democrats (S&D) group in the European Parliament.
Burden of proof
The S&D group is committed to reject any possible rush from the European Commission to grant China MES. “For the time being, the conditions to finalise the trilogue agreement have not been met,” Pittella insisted.
The Commission has prepared a 400-page report containing research on production distortions in China covering four sectors: steel, aluminium, ceramics, and chemical products. That is supposed to replace the non-market economy methods applied to China up to now, shifting the burden of proof to the EU.
“Our red lines are clear. We demand that no additional burden of proof is imposed on European industry. Social and environmental dumping should also be taken into consideration,” Pittella said.
European jobs and businesses have come under mounting pressure in recent years due to China’s excess production capacity and subsidised economy, especially in the steel sector.
In recent years, Europe has been flooded by cheap products sold below production cost. This has undermined the competitiveness of European industry and resulted in the loss of hundreds of thousands of jobs across the Union.
Tajani plays hardball
Socialist MEPs are backed by Antonio Tajani, the President of the European Parliament, who was previously in charge of enterprise and industry at the European Commission and has taken a personal interest in the dossier.
Last week, Tajani said that Parliament would not accept a regulation that shifts the burden of proof on the EU side.
Tajani and the Parliament’s rapporteur, Salvatore Cicu (EPP, Italy), have clearly said there will be “no agreement” unless the new regulation actually protects EU producers.
But Commission President, Jean-Claude Juncker, is pushing hard behind the scenes for an agreement on a new anti-dumping methodology before his State of the Union speech on Wednesday (13 September), as he plan to focus on trade.
MEPs have repeatedly urged the European Commission to counter unfair competition from China in a way that complies with WTO rules.
The Commission rejects the Parliament’s position on the burden of proof on the grounds that it would not be WTO-compatible.
Industry believes that this aspect is debatable, especially as long as the WTO has not ruled on the EU’s current anti-dumping measures against imports from China.
The stakes are high. The EU cannot afford a system, which could put millions of EU jobs and investments at risk.
According to industry sources, there is also a potential risk that the Commission’s anti-Dumping methodology could be open to a challenge at the European Court of justice.
“European manufacturers share the Parliament’s concern that the Commission’s proposed anti-dumping methodology would not be sufficiently robust. Not only would it fail to actually address the threat of dumped imports from countries with significant distortions, the lack of robustness could well invite a myriad of unwarranted challenges at the European Court of justice,” said Ines van Lierde, Chair for a coalition of EU industries under the AEGIS alliance banner.
To placate industry and MEPs, Malmström is proposing to beef up its analysis of domestic markets like China to inform decisions and relieve EU companies from providing enormous amounts of information in their complaints.
But industry sources say the additional burden of proof requirements weigh too heavily on the Commission.
“It does not have the necessary resources, capacity and access to the evidence necessary to prove two levels of distortion. These are: the ‘detailed cost’ distortions and the ‘horizontal systemic’ distortions in any given country outside the EU. The Commission’s proposal creates a substantial risk for EU industry, which could end up with no effective trade defences at all”, warned van Lierde.
As things stand, it seems Juncker will have to wait after his State of the Union speech for a compromise.