EU Launches Anti-Dumping Probes into Chinese Steel Products

18 February 2016

The European Commission has launched investigations into whether various types of Chinese-made steel are being sold at prices below their normal value – a practice known as “dumping” – on the European market.

The probe, announced on Friday 12 February, comes after months of growing tension as steelmakers in various EU member states – such as the UK, France, and Germany – claim that unfairly low-priced imports from the Asian giant are making it increasingly difficult to compete. Government ministers from key steel-producing member states have similarly warned in recent weeks that the sector could soon face “collapse.”

“We cannot allow unfair competition from artificially cheap imports to threaten our industry,” said EU Trade Commissioner Cecilia Malmström in announcing the probes last week.

“I am determined to use all means possible to ensure that our trading partners play by the rules. We have so far put in place trade defence measures for more than 30 types of steel products, and we will continue to effectively address legitimate concerns of our industry,” the EU trade chief continued.

Chinese officials, for their part, issued a statement expressing concern over the investigation. “China hopes that the European Commission will strictly abide by WTO rules, demonstrate prudence and restraint, and use trade remedy tools according to law,” said an official from the Ministry of Commerce’s (MOFCOM) trade remedy investigations bureau, according to an informal translation of their remarks.

The Chinese government agency called for dialogue and cooperation on the matter, while noting that overcapacity is a problem affecting the steel industry at a global scale.

The goods specifically at issue in the probes are seamless pipes, heavy plates, and hot-rolled flat steel, respectively. Two of the investigations – those into hot-rolled flat steel and into heavy plates – came following complaints filed in early January by The European Steel Association, otherwise known as EUROFER.

In the case of the former, the investigation has been launched due to a “threat of injury,” rather than as a result of evidence suggesting that industry has already suffered from these practices.

“This is an early preventive action which is in itself an exceptional step in trade defence proceedings. The European Commission decided to activate this instrument since the complaint presented by the industry contained sufficient evidence to meet the legal demands,” said the EU executive.

Meanwhile, the probe into seamless pipes was in response to a complaint from the Defence Committee of the EU’s seamless steel tubes industry, representing companies that make up over a quarter of the 28-nation bloc’s production of such goods.

All three probes are due to conclude within 15 months – in other words, in mid-2017.

Provisional duties on Chinese, Russian steel

While Chinese exporting producers are being investigated for all three products, the European Commission is also examining whether cold-rolled flat steel from China and Russia is being sold below normal value, and began imposing provisional duties on the good last week.

Cold-rolled flat steel is primarily used in manufacturing, for instance in automobile production, construction, and packaging.

Chinese-made cold-rolled steel is set to face duties between 13.8 and 16 percent, while Russian exporting producers will be charged duties of 19.8 to 26.2 percent, the European Commission said. The investigation into these goods was launched in May 2015.

“A causal link was provisionally established between the injury suffered by the Union producers and the dumped imports from the countries concerned,” said EU investigating authorities in the notice announcing the steel duties.

They noted also that they had concluded, at this point in the probe, that EU industry has suffered “material injury” as a result of the allegedly dumped imports, and that imposing duties would be in the best interest of European producers – which are spread out across 17 member states and employ over 20,000 people.

While EUROFER welcomed in principle the provisional duties, it claimed that those levied on Chinese producers were “extremely low” – and that these may therefore not be enough to slow down the influx of cold-rolled fat steel from the Asian economy.

Public consultation on EU anti-dumping legislation

The news of the new anti-dumping probe comes as the EU continues reviewing whether to start classifying China as a non-market economy for its trade remedy investigations, with the decision expected in the second half of this year.

When China joined the WTO in December 2001, the terms of its accession protocol featured provisions on how to address price comparability when determining subsidies and dumping.

Outlined in Section 15 of the document, this part of the protocol allows for WTO members to treat China as a non-market economy in anti-dumping and countervailing duty probes; however, certain elements of that section are set to expire in December 2016, when Beijing marks its 15-year anniversary as a member of the global trade body.

The impending deadline is expected to prompt a major debate among WTO members, particularly those that frequently conduct trade investigations into Chinese exporting producers, over whether this then means that Beijing will be granted market economy status automatically.

On the EU side, its legislation describes how to treat non-market economy imports, specifically in determining normal value through the use of an analogue third country, unless producers can make “properly substantiated claims” that market economy conditions exist in their case.

Should Brussels deem that Beijing does qualify as a market economy, analysts say that the results could have significant ramifications for trade remedy probes. Given what may be at stake, the European Commission opened a public online consultation last week on the subject, which the EU executive plans to follow with a stakeholder conference next month on what consequences a change may have, in both social and economic terms.

In its preface to the public consultation questionnaire, the Commission notes that once the relevant provisions of China’s WTO accession protocol expires, the EU will be left with three options: leaving current laws unchanged; revising the bloc’s anti-dumping methodology, but not implement any “additional measures”; or to make changes to both the anti-dumping methodology as well as implement a series of new measures that could potentially mitigate any adverse impacts.

“This open public consultation will help the Commission identify the main concerns of stakeholders with regard to the economic consequences of the different policy options and find the most effective ways to lessen any negative impact,” the document read.

The 15-page questionnaire is divided into three sections, specifically on the respondent’s professional background, geographic location, and other related information; views on trade defence instruments and a potential legislative change; and feedback on the possible “additional measures” referred to above.

Meanwhile, various EU industry groups have already spoken out against treating China as a market economy in trade defence investigations, including EUROFER and EU ProSun. The latter group has been the proponent of trade remedy investigations into allegedly unfair trade practices by China in the solar sector. (For more on solar, see related story, this edition)

“If China were to be granted Market Economy Status (MES) by the EU, this would further undermine the effectiveness of the EU’s Trade Defence Instruments. Thousands of steel workers and their employers are accordingly marching on Brussels on Monday 15 February to call for fair trade and to put off the granting of MES to China until the country meets the EU’s criteria to be considered a market economy,” said Axel Eggert, Director General of EUROFER.

Milan Nitzschke, President of EU ProSun, has similarly argued that China still does not qualify as a market economy.

“Following its Five-Year Plans, the Chinese Government subsidises massive production overcapacities, finances dumping and shuts imports out of its own domestic market,” said Nitzscke, arguing that these practices make it impossible for European companies of all sizes to compete successfully without the full support of EU trade defence instruments.

ICTSD reporting; “UPDATE 2-EU hits Chinese steel with duties as industry demands action,” REUTERS, 12 February 2016; “Thousands protest Chinese steel dumping, urge EU to act,” EU OBSERVER, 15 February 2016; “EU governments call on Brussels to tackle China over steel,” FINANCIAL TIMES, 6 February 2016.  

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