China and the EU in Trade Spat Again

The phenomenal growth in Chinese primary aluminum production has to go somewhere and aluminum auto wheels seems to be one such application. Being a “finished product, wheels do not suffer the same export tax that primary ingot is subjected too and has largely contained excessive production capacity and actual demand to a form of balance in China. Semi’s producers however are not only encouraged by rebate for part or all of the VAT they pay on inputs but have positive export incentives as well.

Well the European Commission has decided enough is enough and imposed a 20.6% duty on aluminum car wheels imported from China in an attempt to halt a decline in sales and production for European wheel manufacturers. The duty is applied to Chinese imports for six months, with the option for an extra five years.

The EC launched an investigation into Chinese aluminum wheel manufacturers after a complaint by the Association of European Wheel Manufacturers last June of “dumping” where a product is sold below the cost of production. According to a report in the Telegraph newspaper, Chinese producers are said to be selling at below the cost to produce. The European producers of wheels cited in the case include AEZ of Germany, Speedline in Italy, and Ronal in Switzerland.

The report said imports of Chinese wheels had increased by 66%, from 3.7m in 2006 to 6.1m units by June 2009, and that China’s market share had nearly doubled from 6.3% to 12.4%. As a dispassionate report in the China Daily points out, European producers share of the market fell from 78% to 72% over the last year, although not all of that decline was due to China. Turkey also increased its sales to the EU. The Chinese producers denied wheels being dumped and said consumers would suffer if their more competitively priced products were denied to them. The commission stated they did not see that there would be any impact on consumers, but that is hard to square with the reality that prices will now rise for the main consumers which include BMW and Renault among others.

In another article covered by Reuters, the EU executive is reported to have extended punitive tariffs of up to 60.4% on Chinese steel ropes and cables that are shipped through South Korea to evade EU import tariffs.

The European Union, with a population of 500 million people and a gross domestic product in 2009 of more than 12 trillion euros, is the world’s largest trading bloc by value. As the article points out, the decisions could spark another round of retaliatory measures from Chinese authorities in the growing spat between two of the world’s largest trading powers.

–Stuart Burns

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