EU Agrees to Tougher Antidumping Rules Amid China Tensions

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By Bengt Ljung

Dec. 13 — European Union countries broke a three-year deadlock by agreeing to new, tougher rules for antidumping, making it possible to slap higher duties on imported Chinese steel and other products.

The EU made it easier Dec. 13—amid increasing trade tensions with China—to impose higher duties on Chinese products if raw materials and energy used to produce the goods come at distorted prices.

“This is a major breakthrough. Our Trade Defense Instruments have remained largely the same for over 15 years, but the situation on world markets has changed dramatically,” Economy Minister Peter Ziga of Slovakia, the country holding the EU's rotating presidency, said in a statement.

“This is a crucial step towards a solid solution that would help EU producers cope with unfair competition,” he added.

The breakthrough for a tougher stance on dumping complements the EU's refusal to give China market economy status, which would lower EU antidumping duties against that country.

Only a day earlier, China launched a World Trade Organization dispute settlement procedures against the EU and the U.S. for not changing the way antidumping levies are calculated against exports from China.

Furthermore, on Dec. 9 the European Commission targeted China in three antidumping cases on steel and iron, bringing the total number of ongoing investigation against China up to 20. The EU already has imposed 18 antidumping and anti-subsidy measures against China.

Protectionist v. Free Trade

The standoff between more protectionist and more free-trade-friendly EU countries has continued since the European Commission presented its proposal in 2013.

EU ambassadors of the 28 countries made the decision without a vote, when a sufficient majority was evident. About five or six free-traders still opposed the final compromise, among them the U.K., arguing that importers would be hurt, EU sources said.

The agreement will serve as the negotiating position of the EU countries in talks with the European Parliament and the European Commission for the final legislative version. The Parliament's stance is more protectionist than the EU countries.

The commission, which negotiates all EU trade deals with foreign countries and investigates suspected dumping cases, welcomed the agreement.

“The EU stands for free, rules-based trade and we must be able to address unfair subsidies and dumping with determination,” EU Trade Commissioner Cecilia Malmstroem said in a statement.

At the EU summit Oct. 20-21, EU leaders set a deadline for ministers and their trade experts to reach an accord before the next EU summit, which takes place on Dec. 15.

Commission President Jean-Claude Juncker complained in October that the U.S. can impose far higher antidumping duties than the EU under current rules. EU duties for cold-rolled steel are set at 21 percent while U.S. duties are 265 percent.

The modernization of the EU's trade defense instruments is intended to make levying provisional antidumping and anti-subsidy measures more transparent and predictable. There will be a four-week period from the announcement of duties until they kick in to allow importers to bring home goods they have already purchased.

Also, the commission will be able to start investigations on its own initiative—without complaints from industry—when there is a threat of retaliation. The investigation period will be shortened.

‘Lesser Duty' Rule

But the main controversy creating the deadlock was over what is known as the “lesser duty rule.” The rule stipulates that antidumping duties should only be imposed at a level to eliminate the injury to EU industry, if this level is not greater than the dumping margin.

Germany, France and other EU countries wanted the lesser duty rule removed completely, allowing the commission to levy duties for the whole dumping margin. But about half of the EU countries opposed this.

The final compromise was that the rule should only be lifted under certain conditions. One such condition would be if the commission identifies distortions in the prices of the raw materials and energy of at least 27 percent of the production cost of the final product such as steel. One of the raw materials must also show a distortion of more than 7 percent.

However, the imposition of higher duties will also be subject to a test of what is in the EU's best interest when importers' interests are taken into account.

EU officials emphasized that the modification of the trade defense instruments was not aimed at any particular country, although the huge overcapacity in the Chinese steel sector often is mentioned as the most serious threat.

Commission Vice President for Jobs, Growth and Investments Jyrki Katainen has said overcapacity problems could also emerge in Chinese aluminum and ceramics production.

To contact the reporter on this story: Bengt Ljung in Brussels at correspondents@bna.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bna.com

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