EU Steel Import Trade Spat With China Appears to be Worsening

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The European Union has launched a new investigation into Chinese steel imports, this time to determine if corrosion-resistant steel grades merit further investigation and possible duties.

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The E.U. currently has 40 anti-dumping and anti-subsidy measures in place, according to Reuters. 18 of these are products from China and a further 20 investigations on steel products are ongoing. The European Commission said it would start another anti-dumping investigation into cast-iron products from both China and India while reviewing whether existing duties on Chinese seamless steel pipes and tubes should continue for another five years. The E.U.’s action is being met by a rising level of concern in China which sees protectionist overtones in the E.U.’s moves.

Ascension Debate

The timing of the E.U.’s latest action is viewed with some suspicion in Beijing, coming just days before the 15th anniversary of China’s accession to the World Trade Organization. China says that from December 11 the E.U. should consider China’s prices as fair market value. Others say China must make minimum standards of market participation. Up until now, the E.U., like all WTO member nations, could compare Chinese prices with those of another country of their choosing, in this case Canadian prices. Not surprisingly, Chinese steel prices are consistently below Canadian prices, supporting legislation and anti-dumping penalties.

Europe is far from alone in complaining that Chinese steel prices are unrealistically low, but questions about whether China’s steel prices should be reviewed under WTO rules or under the previous regime says more about whether China should ever been given WTO status then about the timing.

If the U.S., E.U. and other WTO members are now forced to take Chinese prices as fair market value, it will be much harder for them to challenge under existing legislation. This may, in part, explain the recent flurry of legal activity in both the U.S. and Europe, but even with the impending WTO accession, mature steel markets around the world have increasingly been complaining about the rising level of Chinese steel exports.

China Points the Finger

Beijing, on the other hand, says that Europe’s steel problems are due to the region’s own economic weakness and reject any suggestion that their manufacturers are selling below cost or actively dumping steel. Clearly, the arguments will run on next year as they have in this one but, while not acknowledging the problem on the world stage, China has finally taken real action in trying to rationalize the excess production with some degree of success.

China needs a trade war even less than North America or Europe, so set against a rising tide of legislation they have an incentive to get their house in order. In addition, there is considerable domestic popular support, at least in the cities most affected, for closing older and more polluting steel production facilities and so Beijing can claim both domestic and external credit for actions taken. More will need to be done, though, in spite of robust domestic steel demand the country still suffers from more excess capacity than any other country produces in totality.

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Excess capacity in the steel industry may indeed be a global problem but, as both a producer and consumer of half the world’s steel, China has more responsibility than any other nation to get its house in order.

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