EU pushes China to cut back steel sector

5 February 2016

The EU’s top trade official has called on Beijing to cut overcapacity in its steel industry, promising new measures to support European mills threatened by a flood of Chinese imports.

Cecilia Malmström, trade commissioner, told her Chinese opposite number she would open three new anti-dumping investigations into steel products originating from China.

Her letter to Gao Hucheng, Beijing’s commerce minister, comes at a time of deepening crisis for the European steel industry, which has lost more than a quarter of its workforce since 2009.

Last month Tata Steel, the biggest steelmaker in Britain, announced that it was cutting more than 1,000 jobs.

Ms Malmström added that more probes were likely because the commission was swamped by EU producers’ complaints about allegedly unfair Chinese practices.

“In the wake of a worrying trend, I urge you to take all appropriate measures to curb steel overcapacity and other causes aggravating the situation,” she said in the letter, seen by the Financial Times.

Ms Malmström’s tone is likely to alarm Beijing, because it covets recognition as a market economy within the World Trade Organisation at the end of this year

The European Commission has delayed its own proposal to grant China such recognition until the summer in the wake of intense opposition from some EU manufacturers. The commission is now carrying out an impact assessment of the move.

A market-economy designation by the EU would be likely to win political favour in Beijing and smooth the way for investments in both jurisdictions. But it would also make it far harder for countries to retaliate against alleged Chinese dumping with countervailing tariffs.

Ms Malmström’s letter noted that Chinese exports of steel surged more than 50 per cent last year. She added that price drops of 50 per cent for certain products went “way beyond” the decrease in raw material and energy prices.

The Swedish commissioner welcomed an announcement by Li Keqiang, China’s premier, that Beijing intended to cut crude steel production. But she added that such a commitment “must be translated into concrete results as soon as possible”.

Meanwhile, the EU is split over giving China market economy status, with the UK in favour of the move and Italy strongly opposed.

Some members of the European parliament have cited calculations by the left-leaning Economic Policy Institute in Washington that up to 3.5m jobs could be lost in the EU. The commission sharply rejects such claims and estimates that some 211,000 jobs would be at risk if there were no mitigating measures.

Some diplomats and executives are also pressing for certain vulnerable sectors — such as metals, footwear, ceramics and bicycles — to be granted special protection even if market-economy status is granted.

The US is opposed to recognising China as a market economy, arguing that the EU would be “unilaterally disarming” if it were to proceed with the designation this year.

While the debate rages, the EU is continuing to impose retaliatory measures on China. Last month, it said that it would slap provisional duties on high-fatigue performance reinforcement bars, known as rebar, used in the UK and Ireland to strengthen concrete.