October 29, 2007 -- European steel producers today will ask European Union trade officials to apply punitive tariffs on Chinese steel imports, according to people familiar with the matter. It would take at least 10 months for the EU to apply tariffs, but trade officials in Brussels appear to be sympathetic. EU Trade Commissioner Peter Mandelson recently warned China that its "current level of steel production is unsustainable."
Chinese trade officials have said they are sensitive to European concerns and have promised to limit steel exports if they become excessive. The complaint by steel companies, including ThyssenKrupp AG and ArcelorMittal, alleges China is selling steel in the EU at below cost and is damaging European producers.
The move signals frustration in the EU over a mounting trade deficit with China, which reached 59.9 billion euros, or about $86 billion, in this year's first half. The EU's annual trade deficit with China is on track to surpass the U.S. deficit with China for the first time this year.
Like the U.S., the EU has been frustrated in its attempts to trim the gap. This month, Brussels persuaded China to let EU officials closely track textile exports so Brussels could impose emergency quotas if they increase. The EU and U.S. also signed a deal to step up cooperation on fighting counterfeit goods made in China.
The next potential showdown is over steel. China has ramped up production over the past few years to get ready for the Olympics. Now that construction for the Olympics is tapering off, China has extra steel production on hand and is looking for buyers.
An EU official last week said he received assurances from China that it is trying to curb steel production. Heinz Zourek, the EU director general for enterprise and industry, said Chinese officials gave a "very clear and determined" message that China has no interest in being a major exporter. Beijing has imposed new taxes to discourage exports and rein in growth of the industry, which it says is too dirty and energy-intensive.
In Europe, inexpensive Chinese steel can find buyers everywhere, from Danish shipyards to German toolmakers. That is a problem for Europe's steel industry, which is already hurting from the rise of the euro. A strong euro makes Chinese imports cheaper. ThyssenKrupp and ArcelorMittal recently reported slight decreases in orders for certain types of steel.
China is Europe's second-biggest supplier of iron and steel, shipping 5.8 million tons last year, while Russia sold the EU 13.2 million tons. Friday, the EU agreed to raise a quota limiting Russian imports of flat and long steel used in steel pipes, boilers and shipbuilding to three million tons, from 2.4 million tons.
The International Iron and Steel Institute said Chinese steel exports will reach 60 million metric tons this year, up from 43 million metric tons in 2006. The EU has been the biggest buyer of this increase. The U.S. already imposes duties on some Chinese steel products and doesn't expect as much of an influx.
Under World Trade Organization rules, countries can impose special tariffs on a good if it can be proved that another country is exporting that good at a price below what it costs to make. They also can impose special tariffs if they can prove excessive subsidies.
The complaint to be filed today shows "EU producers and many governments agree that Mandelson needs to send a signal to China about their excess steel capacity," said Nikolay Mizulin, a trade lawyer with Mayer Brown International LLP of Chicago.
The case for tariffs on Chinese steel enjoys wide support within the EU because the move is backed by Germany and France, two of the biggest forces within the 27-nation bloc, analysts said. That compares with a debate over EU tariffs on Chinese shoes last year, when the bloc split down the middle over whether to impose them, as retailers lobbied for cheap imports.
Europe is likely seeing steel imports that at one point would have been destined for the U.S. The weak dollar, high shipping costs and relatively low selling price of steel compared with Western Europe and Asia have effectively discouraged steel imports into the U.S. As a result, the number of antidumping trade cases filed by U.S. steelmakers has declined.
Four years ago, close to 40 steel-dumping cases were on file in the U.S. against foreign importers. This year, there are fewer than 10. Most of the current cases apply to niche products, such as steel pipe, as opposed to widely used steel products, such as cold-rolled steel. The U.S. relies on imports because it can produce only about 70% of its steel needs.
Source: The Wall Street Journal
