Wednesday, April 08, 2009

EU warns China over increasing steel exports

A simmering trade conflict between Europe and China is nearing the boil as state-supported Chinese steel companies ramp up capacity despite drastic cuts by the rest of the world.

A 166-page report by the European Parliament has accused China of systematic distortion of its steel market, resulting in "irrational capacity extension". This is promoted, it said, by "artificially depressed cost levels" and export rebates.

The European Commission, the EU's trade enforcement arm, said some Chinese measures to support the steel industry are permissible under World Trade Organisation rules but there has been an escalation into "borderline" subsidies.

"The EU is taking this very seriously and we're in discussions with the Chinese," Lutz Gullner, the commission's trade spokesman, said.

"While steel production is declining all over the world to reduce over-capacity, it is still going up in China. This puts pressure on world markets," he said. The EU steel industry employs 440,000 workers. China's steel exports to the EU were 1.6m tonnes in 2005, 5.6m in 2006, 11.5m in 2007 and almost certainly higher in 2008.

At a time when the steel industry in Europe and the US is in crisis, there was always an inevitability that Chinese steel production would become an issue at some point. Whilst protectionism holds dangers for the global economy, "unfair competition" will be a major area of contention.

read the full story at the Telegraph.

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