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16th Nov 2019

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EU takes aim at China with new tariff rules

  • Steel over-capacity in China has resulted in massive exports to Europe. (Photo: Thyssengroup)

EU countries discussed new rules to combat dumping on Thursday (11 May) that would target cheap imports from countries such as China.

The new rules, first proposed by the European Commission last November, are designed to solve the problem of China’s so-called market economy status.

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China says it should have been recognised as a market economy as of last December in accordance with the pact it entered into when joining the World Trade Organisation (WTO) in 2001.

That new status would change the criteria for determining what was a “fair price” for exports and would make it harder for the EU to impose anti-dumping duties on Chinese goods sold at low prices.

It would also shift the burden of proof to European companies to provide evidence of market distortions.

The Commission proposal said the old EU system, based on a list of market economies and non-market economies, should be scrapped in favour of a new “country-neutral” method.

That method would allow it to impose anti-dumping duties no matter what the exporting state called itself.

"The new anti-dumping methodology is a clear and unequivocal answer to our citizens concerns ... Europe is acting to protect our families and businesses from unfair trade and competition in a sustainable manner,” Maltese economy minister Christian Cardona said on Thursday.

Malta currently holds the EU’s rotating presidency.

Cardona added that the new method should not be interpreted as a protectionist move.

The method says anti-dumping tariffs can be imposed on countries whose market is plagued with “significant distortions”.

These could include state policies, widespread presence of state-owned enterprises, cheap financing, and discrimination in favour of domestic companies.

EU countries agreed to add other criteria on Thursday, such as inadequate enforcement of bankruptcy, corporate, or property laws to the list.

When significant distortions happen, the Commission would still be able to investigate and correct them.

To help European companies file complaints with the EU if they think dumping occurs, the Commission would draft reports on countries and sectors describing the distortions, which companies could then refer to.

China is one of the first countries on which the Commission is expected to conduct such a report.

"China is not a market economy, this proposal is not giving it market economy status,” EU trade commissioner Cecilia Malmstroem said on Thursday after the council meeting.

“We want to respect the obligations of the WTO, we are abolishing the old lists that we have on market economy and non-market economy countries, and we treat the anti-dumping method differently,” she added.

"China is one of the countries where there is dumping, and where we think they are not playing fairly, so yes, China could be a country we look at,” she said.

The European Parliament is also finalising its position on the new method, with member states and MEPs expected to start talks on the final version of the rules after the end of June.

EU officials said the aim was to impose duties similar to levels in place under the old market economy regime.

June summit

Discussions on the new method come at a time when China and the EU are jointly pushing to protect global free trade.

The EU and China will hold a summit in Brussels on 2 June, the first since the election of US President Donald Trump, who said he would put “America first” in his trade policies.

The EU and China have also showed support for the Paris climate deal in the wake of Trump’s threat to withdraw from the global warming accord.

China is looking to the EU to fill a global leadership vacuum as the US becomes more inward looking.

But the EU has remained wary of China over a variety of issues, including massive steel exports that threatened European businesses.

Opinion

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A European Commission proposal on anti-dumping clears the way for the EU to abide by international obligations and avoid a trade war that would be dangerously counterproductive.

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While the debate has escalated about China’s steel overcapacity, it is not exactly new. The first postwar steel crisis occurred in the US and Europe. Beijing seeks to avoid a deja vu of bad policies.

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It is not enough for European officials to simply tell the press that they do not understand the Belt and Road – the vision is clear enough, the point is to decide how to engage with it.

EU-China united on climate, divided on trade

Within 24 hours of Trump announcing that the US will pull out of the Paris climate accord, EU and Chinese leaders presented a united front on fighting climate change. But divergence on trade plagues the new alliance.

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