Posted on 15 Jul 2016
The European Union has opted to directly engage with the Chinese on the issue of overcapacity in its steel market, as a flood of cheap imports from China are harming the industry in Europe.
With the matter in Europe going beyond mere economics and now spilling over into negative public sentiment about China, the EU leadership has stressed its need for engagement, instead of simply imposing punitive sanctions such as anti-dumping tariffs and import restrictions.
European Commission President Jean-Claude Juncker, who is part of a delegation visiting China, on Wednesday announced the establishment of a joint working group between Brussels and Beijing. Presenting it as a result of the annual summit meeting between the EU and China, Juncker said the new framework will be a platform to jointly discuss the issue related to the overproduction of steel and to deal with "verification and monitoring mechanisms." This is intended to supplement existing multinational mechanisms, such as the steel committee established by the Organization for Economic Co-operation and Development.
Another key member of the delegation to Beijing, Jyrki Katainen, the Commission's vice president for jobs, growth, investment and competitiveness, told reporters in Hong Kong on Thursday that the Europeans "want to discuss with Chinese authorities how to reduce overcapacity."
However, the question remains whether such a framework with China would make any headway, as the EU has seen no practical progress in China's human rights record in spite of years of dialogue between the two parties.
"Basically, there are two options," said Katainen. That is, either to "try to solve the problem or try to isolate China, [and] it's better to solve the problem." He added that "of course, we hope things will improve faster, but this is the way the international community functions, so there must be a structural and organizational way to raise different issues and press them." He implied that by acting as a sun rather than a north wind, this is a way to ensure "at least there's a serious attempt to find some order."
The flood of steel exports from China is widely perceived by Europe as dumping in its market. Referring to first quarter steel import data to the EU from China, which jumped by 28% while prices fell 31%, Katainen, the former Finnish prime minister, pointed out that "as long as overcapacity is harming fair trade, it's very hard to support free trade," hinting that the mishandling of the steel issue could affect the decision by the World Trade Organisation of granting market economy status to China, which the latter dearly wants.
He also revealed that he -- along with Juncker and Donald Tusk, president of the European Council -- has "personally explained to the Chinese authority" how dumping cheap steel products in Europe could create an "unnecessary negative atmosphere among Europeans ... and can create instability." By alluding to how the Chinese leadership reiterates the importance of stability at home, he warned his Chinese counterpart that "instability is never good, [and] it doesn't bring anything positive to our bilateral relations."
The European delegation's stay in Beijing coincided with the ruling by a United Nations-backed international tribunal in The Hague on Tuesday, that China's claims to sovereignty over large parts of the South China Sea have no legal basis. Asked how that was handled at the summit, Katainen told the media that the Chinese side "said exactly the same as what they said in public." China's foreign ministry said in a statement that it would not abide by the ruling.
The European delegation repeated its stance on the matter: "The rule of law and the international law must be respected." The two sides thus remain as far apart as ever on this issue.
