EU to develop new weapons against China trade practices

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The European Union is planning new trade defences to counter subsidies and dumping by trading partners such as China, including a more active role for its executive Commission, the bloc’s trade chief said.

New EU moves would intensify the fight by the European Union and the United States against what they say are unfairly priced and subsidised imports from the world’s second-largest economy.

The European Commission imposes duties on goods it thinks are being dumped – sold for less then they are worth – or unfairly subsidised and damaging to EU industry, Reuters reports.

But the Commission currently only acts after receiving a complaint from a European company, and affected firms often fear retaliation from state-capitalist countries, Trade Commissioner Karel De Gucht said in a speech.
“It is undeniable that many European companies are unwilling to come forward and make justified trade defence complaints due to fear of consequences for their business,” he told a Brussels conference on modernising Trade Defence Instruments.
“One idea is that if companies are afraid of retaliation, the Commission can step in and launch cases on its own initiative. Under such …(a) procedure no government could blame a European company for the launch of the case.”

EU officials have said China appears to act against anti-dumping and subsidy cases by filing its own retaliatory cases. In response, the EU Commission has already allowed some companies that file dumping or subsidy complaints against China to remain anonymous. Several U.S. lawmakers have pressed the Obama administration to take a similar line.

Analysts say the proposed new measure had its difficulties.
“You can deflect suspicion from state-capitalist governments of individual companies,” said Fredrik Erixon, director of the European Centre for International Political Economy, a Brussels-based think-tank. “But the strategy is hard, because it’s easy to guess the companies.”

State capitalism – close government control of privately owned business – has been a target of trade complaints from Europe and the United States since Japan’s rise decades ago.
“Another change is linked to the rise of what has been called state capitalism. It is frequently used to describe China’s system, but it can also be applied to Russia, Vietnam and other emerging economies,” De Gucht said.

TRADE DISTORTIONS

De Gucht said that under state capitalism “a range of government policies could be used to give an unwarranted competitive advantage to a national company – from cheap finance to cheap raw materials”.
“This kind of distortion can be difficult to prove in a legal process such as ours,” he said.

The European Union has become more active in the past year in fighting what it sees as unfair trade practices. In 2011, the European Union issued its first challenge to Chinese state subsidies when it raised duties on imports of glossy paper from China.

And EU trade officials also looked into complaints over cheap credit to Chinese firms – low insurance premiums, long repayment terms and “low or subsidised” interest rates. These were blamed for helping Chinese firms underbid EU rivals for big infrastructure projects, hurting EU energy, telecoms and transport developers.

But the bloc’s last substantial update of its trade defence rules came 16 years ago, since when much has changed, De Gucht said.

EU member countries are particularly vulnerable as pessimism and aging populations dampen domestic consumer demand, making growth in the bloc increasingly dependent on trade with faster-growing economies.

China is the European Union’s second biggest trading partner after the United States and the bloc is China’s biggest. Trade between the two is forecast to post a record high of 500 billion euros this year.

But the relationship is tense. De Gucht has in the past complained that China subsidises “nearly everything”, making it hard to compete. And on Thursday, he asked for suggestions on how better to deal with threats of retaliation and to get more companies to cooperate.

This year has already seen several accusations. In February, Brussels opened anti-dumping investigations into ceramics and pipe fittings made in China.

And the European Union joined the United States and Japan in March to challenge China’s restrictions on exports of rare-earth metals, which are used in advanced industries such as electronics and renewable energy.

Later that month, the European Union said it might block non-EU companies from bidding for government contracts after European software companies complained of being sidelined in bids for government contracts in China.

China too has complained of dumping by EU companies. On Tuesday, Beijing said it had set anti-dumping duties on some stainless steel tubes imported from the European Union and Japan.