This article is part of our special report Sunlight at the end of the tunnel?.
The European Commission is pushing for EU leaders to back stricter trade defence instruments against countries such as China at their summit in Brussels today (20 October).
Yesterday, the executive published a communication calling for stronger shields against unfair trade. It wants the heads of state and government to endorse the plan at the summit, before a November meeting of EU trade ministers.
“The Commission has been doing its part, deploying trade defence instruments to their full force. But we have reached the limit of what is feasible under the existing legislation,” Commission President Jean-Claude Juncker said.
The EU accounts for 15% of world imports, second only to the United States, but its trade defence measures are imposed on just 0.21% of imports.
The communication comes after accusations that Chinese steel overcapacity was seriously damaging the European steel industry. Juncker, whose father was a steelworker, has pushed for a robust response to the issue.
He said, “Some EU industries have lost thousands of jobs. We cannot stay idle. The EU’s trade defence rules require an urgent update.”
The Commission has asked for national governments and the European Parliament to quickly adopt a proposal it first tabled in 2013. It advocates changes to the so-called “Lesser Duty Rule”.
Current rules cap the levels of anti-dumping duties through the Lesser Duty Rule. This cap, according to the executive, means that some products, like Chinese rolled steel, face a 21.1% duty in the EU. In the US, which doesn’t have the rule, the average duty is 265.8%, the executive said.
While the tougher measures will be welcomed with some, other stakeholders may be concerned about what they could mean for anti-dumping measures on Chinese solar imports.
Industry and NGOs have warned that continuing those existing measures on those imports will make the EU’s fight against climate change far more expensive. They will be reviewed in March next year.
“Removing the LDR and applying astronomical tariffs on Chinese solar will only hurt the consumer, who is meant to be at the heart of the Commission’s Energy Union strategy,” said James Watson, CEO of SolarPower Europe, the European Photovoltaic Industry Association.
Member states are divided over the rule, with some countries traditionally in favour of free trade having supported it historically.
But European Commission Vice-President Jyrki Katainen said he was confident those historic differences could be overcome.
“Everybody agrees that overcapacity is a cancer in the world of free trade,” he told reporters at the launch of the communication.
“Everybody, including China, knows what we are trying to oppose, and they will take it positively.”
The communication also suggests a new methodology “to capture market distortions linked to state intervention in third countries”.
The measures on Chinese solar products were imposed after accusations that producers were benefitting from state subsidies and selling their products for lower than what they would cost on the domestic market.
It means that the communist country will have to be treated as a free market equal when settling trade disputes.
That poses a problem for the EU, as it can currently use a different methodology to find anti-dumping than it could if China had the status. If the 11 December deadline passes without action, China could sue the EU in the WTO.
The proposed changes would respect WTO rules and allow the EU to impose higher anti-dumping changes in some instances, the Commission said.
They will also allow deal with any “forthcoming changes to the legal framework of the WTO”, the Commission added.
