Mandelson faces dilemma as Chinese imports flood in

Trade Commissioner Peter Mandelson will next week (17 October) present to his fellow commissioners proposals aimed at bolstering the EU’s trade defences amid mounting calls from the European steel industry for controls on imports from China.

The proposals, which set out criteria for applying trade defence instruments such as increased tariffs, have been the subject of intense political debate recently, partly because of their potential impact on a growing number of European companies with manufacturing outside the EU.

EU anti-dumping policy has hitherto been based on strict economic and legal criteria. Sanctions are generally imposed on foreign manufacturers when products have been ‘dumped’ on the EU market at prices inferior to those charged on the home market or below the cost of production.

The increasing complexity of the intertwined global economy, however, has put Mandelson under pressure to consider a wider range of interests, in particular environmental and social arguments, when ruling on cases.

Attention is turning to how Mandelson will handle a complaint from the EU-based steel industry, which is currently feeling the heat of China’s aggressive pricing. Eurofer, the European industry lobby, is expected to file evidence to the European Commission by the end of this month that Chinese companies have benefited from unfair state subsidies.

"China has gone from being the fifth most important steel exporter to the first in the past four years. They’ve done that through subsidies," said an industry insider. "The steel industry has to use the anti-dumping mechanisms to target companies helped by the Chinese state."

Steel exports are a major element in China’s ballooning trade surplus with the EU. According to Eurofer, imports of steel are expected to increase by more than 50% from 2006. The bulk of these imports will come from mainland China.

"The reason why the Chinese are exporting too much to the EU is because steel prices are higher in the EU, because the euro is stronger. The EU is clearly the best, juiciest market to be in," said a Brussels-based trade lawyer.

Eurofer’s plans to submit a complaint have provoked a strong response from EU users of steel who benefit from the influx of cheap imports. Engineering lobby Orgalime claims that limited domestic stocks have forced it to resort to imports from China.

Adrian Harris, secretary-general of Orgalime, said: "It just does not make sense to hit the competitiveness of the EU’s metalworking and mechanical engineering SMEs, which provide more than seven million jobs throughout the EU, to protect the interests of an industry which, through its increasingly global development, now only provides 250,000 jobs in a few European countries."

He added: "For us matters are simple. Our companies must have access to the supplies of steel they need at competitive market conditions. If our traditional suppliers in Europe can provide these, all the better. If not, we need to find alternatives for our companies to be able to continue manufacturing here."

Mandelson is expected to unveil finalised proposals on anti-dumping policy on 17 November.

Trade Commissioner Peter Mandelson will next week (17 October) present to his fellow commissioners proposals aimed at bolstering the EU’s trade defences amid mounting calls from the European steel industry for controls on imports from China.