China export threat to europe jobs needs deeper probe, EU says

JAN 29, 201612:14 AM

[BRUSSELS] European Union Trade Commissioner Cecilia Malmstroem said she's looking more deeply into the potential threat to jobs in Europe of lowering EU tariffs on Chinese goods such as steel.

The remark highlights reservations in the 28-nation EU about recognizing China as a market economy 11 months before a deadline for a European decision on the matter. Such a step would make it more difficult for manufacturers in Europe such as ArcelorMittal to win sufficiently high EU duties meant to counter alleged below-cost - or "dumped" - imports from China.

"We are running now a quite advanced impact assessment," Malmstroem told a conference on Thursday in Brussels. "It's still quite premature to say too much." The European Commission, the EU's executive arm, held an initial debate two weeks ago on whether to recommend that the bloc recognize China as a market economy and signaled it would return to the issue around mid-year. Any proposal from the commission would need the approval of EU national governments and the European Parliament.

Beyond being a political prize that Beijing is lobbying for, market-economy status for China would ensure the EU uses Chinese data for trade investigations affecting the country. The bloc currently uses other nations' figures to calculate anti- dumping levies against China on the grounds that Chinese state intervention artificially lowers domestic prices and makes them an unreliable indicator of a good's "normal value." This practice results in higher EU duty rates against Chinese exporters.

Under the agreement that led China to join the the Geneva- based World Trade Organization in 2001, WTO members pledged to scrap in December 2016 a shortcut for applying a non-market economy standard in calculating anti-dumping duties on China. At the same time, this development won't grant China blanket status as a market economy.

"It's not only a technical decision," Malmstroem said.

"It is also an economic and increasingly a political and social decision that needs to be made." She said that "huge" over-capacity at China's steel mills has led to Chinese dumping in Europe and that part of the European industry is "under a lot of stress." Job losses at EU steel companies are politically sensitive in Europe, according to Malmstroem.

"It's a very emotional debate in many countries," she said. "This is of course a very important social situation." Malmstroem said there is an "urgent need to adjust supply" in China, which accounts for about half of global steel production and posted its slowest economic growth in more than two decades in 2015. The Chinese government on Jan. 24 pledged steel-capacity cuts.

BLOOMBERG