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EU Presents Plans to Support Struggling Steel Sector

Steel imports from China to the EU have more than doubled over the past two years


European steelworkers take part in a demonstration to call for action on subsidized Chinese imports, in central Brussels, on Feb. 15.
BRUSSELS—The European Union presented new plans to support the bloc’s struggling steel sector on Wednesday, following warnings from EU industries and governments that unfair trade practices by global competitors such as China could push the sector to the brink of collapse.
The plans from the European Commission, the EU’s executive arm, include speeding up the adoption of tariffs on imports that are “dumped” at below-market prices and scrapping rules that limit the level of duties the EU can apply to steel imports. They also include a surveillance mechanism for steel products which can be triggered if imports threaten to harm EU producers.
The new measures come as Europe’s steel industry suffers from overcapacity that has led to thousands of job losses in recent months. The industry represents 1.3% of the EU’s gross domestic product and provided around 328,000 jobs in 2015, according to the commission.
Ministers from several EU governments, including France, Germany and the U.K., urged the bloc in February to step up action to protect the region’s steel industry from unfair trade practices by competitors like China and Russia.
“A joint effort is needed to overcome these serious challenges fuelled by global overcapacity, a dramatic increase of exports and an unprecedented wave of unfair trading practices,” the commission said.
European steelmakers say Beijing’s policies, that lead Chinese firms to pump out far more goods than their domestic market can consume, cause a significant problem. The result has been a flood of cheap products shipped to Europe, the U.S. and other developed markets.
The commission said overcapacity in China—the world’s largest steel producer—has been estimated at around 350 million tons, almost double the EU’s annual production.
Steel imports from China, the world’s largest steel producer, to the EU have more than doubled over the past two years while the bloc’s demand languishes below levels seen before the 2008 financial crisis. EU steel prices have dropped about 40% over the past two years.
“The overcapacity has given rise to an unprecedented wave of unfair trading practices distorting the global level playing field,” the commission said. It added that these trade practices are shifting the burden of global overcapacity disproportionately toward European producers and their employees.
In recent months, the bloc has taken measures to protect steelmakers from unfair trade, opening three investigations into allegations of unfair trade practices by Chinese manufacturers and slapping tariffs on two types of steel imports from China.
The EU has 37 trade defense measures in place on imports of steel products—16 of which concern China directly. At the moment, there are ongoing investigations for 10 steel products, six of which concern China, the commission said.
But governments and the industry have complained that the time to process investigations once a complaint is launched is too long. In its plan, the commission said it would speed up the adoption of provisional duties by reducing investigation procedures by one month—from nine to eight months.
That may not be enough to deal with the industry’s concerns.
“The EU’s Trade Defence Instruments’ capabilities must be upgraded substantially,” said Axel Eggert, Director General of the European Steel Association Eurofer.
“For this, the U.S. must be the benchmark: In the U.S. the gap until the implementation of provisional anti-dumping tariffs is only 4½ months,” he added.
Problems with overcapacity in the steel industry could also further complicate a debate in the coming months over whether the EU should formally grant China market-economy status, a move that will fundamentally change its relationship with its second-largest trading partner.
If the EU recognizes China as a market economy, it would make it more difficult for Europe to impose tariffs on Chinese goods, even though European industries complain that Beijing uses government subsidies to boost exports and undercut overseas competition.
Still, the commission cautioned that no decision on this issue can be taken “without significant transitional periods and substantial attenuating measures.”

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