The basic reasoning of EU steel users is that EU steelmakers don't produce enough steel to meet their needs, and hence need supplies from China. If sanctions were to be applied, EU steel users believe they would be unfairly penalized. With that in mind, on to the steelmaker's case (and more) care of the International Herald Tribune. It's going to be interesting to see what the EU makes of the steelmaker's request. With EU Trade Commissioner Peter Mandelson already striking a less than conciliatory tone towards China, expect sparks coming from this direction. Trade wars against China all around are looming:
European Union steel users sought on Tuesday to counter growing calls by many EU steelmakers for trade barriers against imports from China, saying such measures could drive the industry out of the bloc.
European steel executives meeting in Berlin on Monday said they might ask as soon as this month for EU anti-dumping duties against China's fast-growing imports which they say benefit from massive state subsidies.
But European engineering association Orgalime, representing national groups whose members include big steel consumers such as Siemens , ABB, and Alcatel-Lucent plus many smaller firms, said China is now vital to the sector.
Orgalime Secretary General Adrian Harris said it did not make sense to hurt the EU's metalworking and mechanical engineering sector which employs over 7 million Europeans to protect steelmakers who provide only 250,000 jobs in Europe.
"For us matters are simple -- our companies must have access to the supplies of steel they need at competitive market conditions," Harris said in a statement.
European steel makers fired the opening shot Monday in a looming trade war with China, asking the European Commission to impose tariffs on soaring imports, which they say are being dumped on the market at prices hugely below cost.
The request sets the scene for a debate likely to divide European governments, as steel makers and companies reliant on cheap imports fight out of their respective corners.
The European Commission will investigate the complaint and could impose provisional measures on Chinese imports within nine months. The steel makers have requested duties of 25 percent to 40 percent on cold-rolled and galvanized steel, which are typically used in engineering and construction work.
The call for countermeasures is likely to be backed strongly by several South European countries and Germany but opposed by countries more committed to free trade like Britain and the Nordic countries.
Divisions within the European industry were apparent within hours of the complaint being lodged. Gordon Moffat, director general of the European Confederation of Iron and Steel Industries, or Eurofer, said Chinese output was "out of control" and talks with Beijing have failed to cap overcapacity.
Eurofer said exports of the products concerned had "inundated the EU market," following exponential export surges into the market by up to 3,300 percent over the past four years.
"Massive volumes have been dumped on the EU market at dumping margins of up to 40 percent. EU domestic prices have been undercut by up to 25 percent," Eurofer said in a statement.
But Adrian Harris, the secretary general of Orgalime, which represents the engineering industry, said that its members were already having difficulty sourcing raw materials including steel.
The key to the commission's decision is the likely effect of any countermeasures on the overall European economy.
Orgalime says that 250,000 jobs in Europe depend on steel making, as opposed to 7 million in metalworking and mechanical engineering, which use imports.
Those figures are disputed by Eurofer, which says that steel making employs 372,000 directly and a further 1 million indirectly. Moreover, the antidumping request was aimed at specific products to avoid harming consumers, Moffat said.
The extent to which some manufacturers are already dependent on imported Chinese steel makes the case a particularly delicate one for Peter Mandelson, the European trade commissioner. He recently confided in an internal document that a conciliatory approach to Beijing on trade was not yielding results and suggested that greater use should be made of trade defense instruments.
He will have to determine first whether dumped imports are injuring European
steel producers and then if countermeasures are in the EU's overall interests.
Though the price of steel is relatively high, making it harder to argue that European steel makers are suffering, Mandelson will also have to consider whether a further surge of imports is likely to follow when construction for the Beijing Olympics is completed. This work is currently soaking up Chinese production, which could be redirected to Europe.
Because of market sensitivities, the commission said that it could not formally confirm receipt of the request from Eurofer. But Peter Power, spokesman for Mandelson, said that any such demand would be investigated thoroughly. "It is bound to be a very sensitive and complex case as there is so much at stake," he added.
The commission's decision will ultimately need approval from EU member states and could be challenged by Beijing at the World Trade Organization.
Moffat said that the entire Chinese steel industry is built on subsidy.
"Everything from soft loans from state-owned banks to support from regional banks to tax holidays," he said.
Steel imports from China from January to September 2007 grew 137 percent to 8.9 million metric tons from the same period last year. Meanwhile, the European trade gap with China widened by nearly 25 percent in the first seven months of this year.
But Harris of Orgalime said that some members of the engineering industry already planned to argue against the imposition of tariffs.
"We find ourselves in a situation of strong growth in our industry, and our members are finding a shortage of raw materials," Harris said, arguing that "there is perhaps a tendency to look over one's shoulder at the past and not to the future."
The number employed in European steel making was "peanuts" compared to those reliant on imported steel, he said.