EU Launches New Trade Remedy Investigations into Chinese Steel

15 December 2016

The European Commission has launched a new investigation into whether Chinese manufacturers are selling steel at prices below their normal value on the European market, a practice known as “dumping.”

On Friday, the EU’s executive arm initiated an anti-dumping investigation on imports of certain corrosion resistant steel originating in China following a complaint issued by the European Steel Association (Eurofer) on behalf of eight EU producers.

In addition, the Commission will undertake a review of anti-dumping measures set to expire on Chinese seamless steel pipes and tubes to determine whether they should continue.

To date, the EU has 18 anti-dumping and anti-subsidy measures in place on Chinese products in order to address alleged “dumping,” with 20 more investigations related to steel still in progress, including three with provisional duties already established. (See Bridges Weekly, 17 March 2016).

China is by far the largest producer of steel globally, producing over 803 million tonnes in 2015. Japan marked a distant second at 105.2 million tonnes, according to figures from the World Steel Association, which assesses EU steel production at the member state level.

When ranked collectively, the EU as a bloc surpasses Japan to be the world’s second largest producer of steel globally, with an output of more than 177 million tonnes of steel a year, comprising 11 percent of global output according to the European Commission. The EU’s domestic steel sector is the source of 328,000 direct jobs across the bloc, furnishing 1.3 percent of its GDP.

The EU and China have previously pledged to increase their efforts at cooperating to address the steel crisis. A steel platform was established at the annual EU-China Summit held in July, tasked with addressing verification and monitoring of steel being shipped abroad, among other steps. (See Bridges Weekly, 14 July 2016)

China market economy debate continues

In separate though related news, the investigation news came just before China’s 15th anniversary of WTO membership, which passed on 11 December. This date also marked the expiry of certain provisions of the Asian economy’s “accession protocol” which refer to the use of certain “price comparison methodologies” when other WTO members conduct trade remedy investigations involving Chinese producers and/or exporters.

How to read that provision – which allowed for using surrogate prices in anti-dumping probes, subject to certain conditions – has long been a debate in trade circles, particularly in relation to the rest of China’s accession terms.

One day after China’s 15th anniversary, Beijing submitted requests for WTO consultations with the US and EU on the subject (DS515 and DS516), marking the first step in dispute settlement proceedings. While the documents were not yet publicly available at press time, a statement by a spokesperson from China’s Ministry of Commerce said that the “surrogate country” practice used by other WTO members in anti-dumping investigations must “immediately stop” in light of the expiry date referred to in the accession protocol.

“The spokesman indicated that China has seriously communicated with relevant members of WTO on multilateral occasions, and urges them to favourably fulfil their obligations to end the practice of anti-dumping ‘surrogate country’ according to the schedule. Unfortunately, however, the US and the EU have not performed their obligations so far,” the ministry’s statement says.

A separate article by Chinese Minister of Commerce Gao Hucheng in the People’s Daily explained that “China’s legitimate interests should be duly protected,” referring specifically to those WTO members which have not ended their use of the surrogate country practice.

“But a few have refused to do so. They even tried to obscure the term ‘market economy’ with their domestic logic, or cite overcapacity in some industries as an excuse for delay,” the Chinese minister said. Specifically regarding overcapacity, he noted that the problem is global in nature and requires an international response – while it should not deter countries from meeting their international obligations.

The issue of whether to grant China market economy status has been hotly debated by EU lawmakers over the years. While the EU is among those which maintain that China is not yet a “market economy,” last month the European Commission put forth a proposal on updating its anti-dumping and anti-subsidy procedures, which would remove the current distinction between market and non-market economies in light of the December deadline.

The proposal introduced a new approach that would drop the use of “non-market economy” or “market economy” lists, employing instead a non-standard approach based on whether there are significant distortions in domestic prices or costs, such as when there is state intervention in a sector. The proposal must still be approved by the bloc's other legislative bodies, the Parliament and Council. (See Bridges Weekly, 10 November 2016)

In related news, the European Council’s permanent representatives broke a three-year deadlock on modernising the bloc’s trade defence instruments, and will allow for occasionally not using the “lesser duty rule” in certain instances involving distortions that involve raw materials. The European Commission had proposed upgrading this trade defence toolkit over three years ago.

ICTSD reporting; “EU upsets China with new steel price investigation,” REUTERS, 9 December 2016; “China challenges EU and US over market economy status,” FINANCIAL TIMES, 12 December 2016.

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