What is dumping and other keys to understanding the steel crisis | Economic crisis

Overproduction has led China to flood the international market with artificially low-priced steel, causing the loss of thousands of jobs in European producing countries.

The dumping consists in sell a product below its cost of production or in exporting it at a lower price than that normally applied in the market of one’s own country.

It is a practice considered unfair in world trade, and its objective is usually, among others, to seek to compete in the international market more effectively, occupy a greater market share or eliminate competition. It also usually occurs due to the existence of surpluses in the domestic market.

The World Trade Organization (WTO) does not prohibit the dumping, but it establishes that it is reprehensible “when it causes or threatens to cause material injury to a domestic industry in the importing country”.

For this reason, the WTO does not regulate the actions of companies that incur dumpingBut it does authorize the governments of the affected countries to take action when “genuine injury is caused to the competing domestic industry”.

In order to take such measures, the government in question must be able to demonstrate that there is dumping, calculate its magnitude (how much lower the export price is compared to the market price of the exporter’s country) and show that it is causing damage or threatens to cause it.

In general, an anti-dumping measure consists of applying additional tariffs to an imported product to bring its price closer to “normal value” or to eliminate the damage caused.

The case of Chinese steel

The steel crisis, which has hit the Basque Autonomous Community hard with the indefinite closure of the Sestao ACB, is mainly motivated by the artificially low prices of Chinese steel, against which the rest of the countries find themselves unable to compete.

In the case of Euskadi, in addition, the price of electricity must be added to the equation, since the Basque steel industries (those that consume the most) pay up to 38% more for electricity than those in Germany, for example.

Returning to Chinese steel, the Asian giant produces almost as much as the rest of the world producers combined, according to data from the World Steel Association, with an installed capacity to produce up to 1,200 million tons per year (in Europe, the consumption of steel is of 150 million tons, and Spain is the third destination for imports from China).

However, the reduction in demand brought Chinese production in 2015 to 804 million tonnes, down 2.3% from the previous year.

Even so, China currently maintains an overproduction of 400 million tons per year, which exports abroad at a price between 35% and 40% below the price of some products. As a consequence of this practice of dumpingIn the last six months alone, more than 7,000 jobs have been lost in the European steel industry, according to the European Steel Association (Eurofer).

In this sense, the president of Eurofer, Geert Van Poelvoorde, has regretted that vis-à-vis the United States, which imposes “anti-dumping duties of 200%” on Chinese steel, and India, which has established minimum prices for Chinese steel. , the EU sets them at between 13% and 16%, although it detects a dumping 60%.

Van Poelvoorde has also warned that if China receives market economy status “we will be left completely naked.” But what does this mean?

According to the agreement by which China entered the WTO 15 years ago, this December is the deadline for its members to grant it market economy status, a procedure that will change the way the EU defends itself through anti-dumping duties of unfair imports.

The Institute for Economic Policy has calculated that Giving China market economy status will put 3.5 million jobs in the EU at risk and 228,000 million euros in annual GDP.

What is the European Commission doing against Chinese dumping?

In this context of global crisis by the dumping In China, the European Commission (EC) has recently launched investigations into three steel products imported from China to determine whether they have been placed on the Community market at artificially low prices.

Specifically, the products that the EC is analyzing are tubes, plate and hot-rolled flat steel.

These new investigations join a total of 37 trade defense measures that the EU has carried out on imports of steel products, while nine investigations are still ongoing.

Apart from these three new investigations, the EU Executive decided to impose provisional anti-dumping duties on cold-rolled flat steel products from China and Russia.

Specifically, the taxation imposed by the EC is between 13.8% and 16% for Chinese companies and between 19.8% and 26.2% for Russian companies, and the Commission also reserves the possibility to require in the future “retroactive taxes”.

China has also advanced that it plans to cut excess steel production capacity by between 100 and 150 million tons per year (up to 12.5% ​​of the current total) during the next five years.

Under WTO rules, the EU can impose anti-dumping duties on third-country products if an investigation shows that they enter the European market at lower prices than producer prices and thereby harm the Community industry.

Nevertheless, While the US establishes provisional anti-dumping measures in 45 days, Europe takes 9 to 14 months to approve them, which “is killing our industry in many aspects”, as the Basque Government has warned.


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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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