EU Risks Escalating Trade Dispute with China

The European Commission intends to lodge another trade complaint against China.

An ArcelorMittal plant in Ostrava, Poland, March 29, 2011
An ArcelorMittal plant in Ostrava, Poland, March 29, 2011 (Flickr/CzechR)

The European Union risks escalating its trade dispute with China when it joins Japan in a World Trade Organization case against Chinese duties on steel tubes.

Press agency Reuters reported on Tuesday that the body seeks to overturn Chinese import duties on stainless steel tubes fabricated by Germany’s Salzgitter and Spain’s Tubacex, among others.

The move follows China’s announcement last week that it intends to investigate the alleged dumping of European wines which was itself apparently in retaliation for the European Union’s decision to impose tariffs on Chinese solar panels.

Northern European countries, including Germany, the Netherlands, Sweden and the United Kingdom, had voiced concern about the solar panel tariff which will be 11.8 percent until August when it is slated to be raised to 47.6 percent unless an agreement with the Chinese has been reached by then. German chancellor Angela Merkel promised her Chinese counterpart Li Keqiang in Berlin last month that her country would “do what it can so that there are no permanent import duties.” She added, “We don’t believe that this will help us.”

Li, after a meeting with Merkel in the German capital, had warned that the tariff threatened jobs in the whole European solar panel industry which, shielded from Chinese competition, would be under less pressure to innovate. “That will harm the interests of the European consumers,” he argued, who will be paying more for solar panels made in Europe.

Britain’s and Sweden’s energy ministers Greg Barker and Anna-Karin Hatt agreed in an article for The Telegraph newspaper earlier this month where they wrote, “Free trade is inherently in the interests of both European consumers, giving them better goods at better prices; and European companies, giving them another reason to improve their products to hold their own in the global marketplace.”

Europe’s trade commissioner Karel De Gucht, however, insisted in an interview with Germany’s Frankfurter Allgemeine that he did not intend to stifle competition. “I just want a ‘level playing field,’ with fair conditions for the entire market,” he said. “That has nothing, absolutely nothing to do with protectionism.”

Solar panel producers in both China and Europe are, in fact, subsidized by their governments. As are European wine growers. In 2008, they received €2.8 billion in agricultural subsidies. China also taxes steel tubes made overseas.

All the complaints of, and probes into, protectionism have merit. But it seems neither Chinese authorities nor the European Commission are much impressed by the other’s actions and prefer to engage in a tit for tat than negotiate freer trade conditions. In doing so, they risk a trade war between the world’s first- and third largest economic blocs that can only harm consumers and producers in both.