Ahead of the EU meeting where the 28 EU member countries will discuss trade policy, the European Commission yesterday called on governments to approve the modernization of European trade defenses. Brussels promised to present by the end of the year the new methodology for calculating duties with the goal to resolve the issue of whether to grant China “market economy status” (MES).
On this issue, the industrial establishment reiterated its opposition.
In a speech focused on trade, the Vice President of the European Commission, Jyrki Katainen, said yesterday in Brussels that Europe must strengthen its trade defense. The Commission believes that the defense trade tools in the EU “must be mandatorily updated, strengthened and made legally more solid.” Finland’s former Prime Minister clarified that “trade must be free, but fair.”
China believes it should be automatically granted market economy status by the end of the year, 15 years after joining the WTO. In January, the Commission delayed the decision but, under pressure from countries (especially Italy, due to concerns about job losses) that are concerned about a weakening of import tariffs, a compromise solution could be found.
There are two issues on the table, while the future of the free trade agreement with Canada hangs in the balance because of opposition from Wallonia.
The first issue concerns the new calculation of anti-dumping duties. Yesterday, Brussels confirmed that a proposal will come by the end of the year. Katainen said the goal is to defend economic sectors, independently from the national origin of competing products, overcoming the differences between countries with and without market economy status.
“The Commission will propose a new methodology for calculating dumping on imports of countries with market distortion and where the state has an overwhelming influence on the economy,” Katainen said in Brussels.
The goal is to avoid chosing whether to grant economy market status to China, a decision that has split the EU bloc.
Lisa Ferrarini, Vice President of Confindustria for Europe, warned that the industrial establishment, which opposes granting market economy status to the Asian country, does not like the initiative.
The issues of strengthening anti-dumping rules and granting market economy status to China should not be considered together, she said. “They have separate stories, a different legal basis, different targets.”
With Brussels’ proposal for a new calculation of duties, “European anti-dumping will become much more uncertain and less effective, increasing the costs for European businesses that want to file a complaint,” Ferrarini said. “Moreover, the responsibility to prove the presence of market conditions in the origin country, instead of falling on the Chinese manufacturer, as it has been the case so far, will fall on the European party,” she said.
Confindustria has therefore called for changes in the EU proposal.
“The Commission seems to ignore some very important provisions in China’s protocol to join the WTO which clearly say that Chinese dumping must be treated like a separate methodology, because coming from a system which is not of market. (…) I hope European Trade Commissioner Cecilia Malmström change her proposal soon. She has the time to do it and fix future damages that still exist,” the Confindustria vice president said.
Aegis, the association that represents around 30 European industrial sectors, believes that “the status of not market economy is crucial for every effective anti-dumping measure.”
The other issue on the table today is a proposal that scraps the limits on anti-dumping duties.
Current European rules consider that duties must only remove the damage caused by cheaper imports. As a result, EU duties on some steel products from China are at 21%, while in the US are 266%.
After three years, the EU proposal is still being negotiated by the EU’s 28 countries, so much so that Brussels yesterday called for an agreement. The idea to review the rule, known as Lesser Duty Rule, is backed by manufacturing countries (led by Italy and France), but less by those with heavier industries (the UK and Scandinavia). The crisis of the steel sector shocked the governments, but was this enough to find an agreement soon as called for by the Commission? It’s still too early to say.
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