EU Executive Announces Plans to Boost Steel Sector
The European Commission released on Wednesday 16 March a plan detailing various steps – both existing and new – aimed at supporting the 28-nation bloc’s struggling steel sector.
The news comes just one month after the EU executive launched investigations into whether several types of Chinese-made steel are being sold on the European market at prices below their normal value, in what is known in trade jargon as “dumping.” (See Bridges Weekly, 18 February 2016)
In a press release announcing the plans, the Commission cited “serious challenges” resulting from “global overcapacity, a dramatic increase of exports, and an unprecedented wave of unfair trading practices.”
Brussels has specifically referred to China – which leads the world in steel production – as allegedly having an overcapacity in production at 350,000 million tonnes. Chinese officials have argued that the actual issue is that of overcapacity worldwide, with Minister of Commerce Gao Hucheng referring to it as a “global problem” in a February press conference.
Steelmakers in various EU member states, however, have argued that low-priced Chinese imports are contributing to their difficulties in remaining competitive.
“We must do more to help the steel sector and other energy-intensive industries adapt, innovate, and compete on the basis of quality, cutting-edge technology, efficient production, and a highly skilled workforce,” said Jyrki Katainen, the Commission’s Vice President for Jobs, Growth, Investment, and Competitiveness.
According to EU figures, the steel sector accounted for 328,000 direct jobs last year, and potentially many more from other sectors that rely on steel in their processes. The 28-nation bloc produces approximately 170 million tonnes of crude steel annually.
The 13-page communication is divided into several sections, which purport to describe the challenges facing the sector; possible tools under trade, investment, labour, and climate and energy policy; and a concluding part that ultimately reiterates calls for key industry players to “work together in a spirit of sincere cooperation.”
The communication refers, among several other areas, to the use of trade defence measures as one approach to help address the situation. It notes, for instance, that EU investigative authorities are now launching probes “based on a threat of injury” and other steps aiming at providing support to industry before duties are actually confirmed.
In addition, the communication says, “the Commission will immediately use the available margins to further accelerate the adoption of provisional measures,” outlining various procedural steps to that end.
The document also calls for updating EU trade defence instruments, such as adopting a “modernisation package” that was put forward in 2013 and has stalled at the Council level. One of the proposed changes at the time was to allow for deviations from the bloc’s “lesser duty rule” – in other words, when the duty is set to levels equal to either the dumping or injury margin, depending on which is lower – in certain cases.
This rule is currently mandatory under EU law, and the Commission is now arguing that along with advancing the modernisation package that the rationale for dropping this practice “should apply also to the steel sector and more generally to situations where the market of the exporting country is subject to significant distortion.”
The document also makes a reference to the ongoing public consultation on whether the EU should grant China with market economy status, specifically given what this would mean for anti-dumping investigations. (See Bridges Weekly, 18 February 2016)
Subsidy notifications, bilateral meetings, other measures
Other steps that the Commission has outlined as being key to “an effective and responsible trade policy” for the steel sector includes pushing China to improve its WTO subsidies notifications, adding that this would include questions under Beijing’s upcoming Trade Policy Review this year.
China, as one of the world’s top four traders, goes under these WTO reviews on a biennial basis, as does the EU, the US, and Japan.
Other forums for discussion that the EU mentioned include the G-20 process, which China is chairing this year. Brussels is also conducting “steel contact group” meetings with various other producing countries, including China.
Besides trade, other areas for action described in the communication include efforts to make investing in new steel-related technologies and a skilled workforce. Furthermore, the communication notes that the Commission is set to put forward various proposals on electricity market design and governance, along with renewable energy and energy efficiency, in the context of its Energy Union discussions.
These steps, it says, are key to ensuring that “energy-intensive industries” – such as steel – become more sustainable, while boosting their competitive edge.
“Energy prices are… very volatile and they could rise again. To contain them Europe needs to contain energy consumption, including by encouraging greater energy efficiency of its industry, and promote competitive energy prices by tapping into the potential of the single market and regional market,” the communication explains.
The ongoing discussions about the revision of the EU’s Emissions Trading System (EU ETS) from 2020 onward are also referred to in the document, including talks relating to distribution of free carbon allowances, carbon leakage, and steps geared toward facilitating innovation-focused investments. The EU ETS is the bloc’s flagship cap-and-trade programme, and has been in place since 2005.
Long road ahead
The document ultimately acknowledges that the sector’s problems run deep, and will ultimately take time to address.
“The long-term challenges of the steel sector will not go away,” the communication says. “A range of investment instruments and focused policies in areas like trade, innovation, competition, or the Energy Union will help the steel industry to compete through innovation, resource efficiency, modernisation, and reform.”