An approaching World Trade Organization deadline could result in
higher prices on European goods made with parts and materials
imported from China.
On Dec. 11, the European Union could grant China so-called
"market economy status," thereby using Chinese data for calculating
duties in anti-dumping cases. Or European lawmakers could draft new
rules that do away with the differentiation between market and
nonmarket economies that the EU has used in the past.
The odds are against China getting the treasured title by the
WTO issued deadline, said Edwin Vermulst, a partner at VVGB
Advocaten, a Brussels-based law firm. "There is simply too much
pressure from southern EU states and industrial sectors with a
protectionist agenda to maintain or even increase the high level of
duties," Mr. Vermulst said.
Based on a proposal made public last month, the European
Commission is on a mission to change its anti-dumping and
antisubsidy framework in favor of more stringent rules.
This raises concerns for finance chiefs whose firms have
outsourced part of their supply chain to China, according to
Stephen Adams, a partner at Global Counsel LLP, a consultancy based
in London. "When you have outsourced…to China, you see duties as a
cost factor and not as protection," he said.
A new slate of European rules is likely to discourage Chinese
companies from dumping products in the EU and punish those that
benefit from Chinese government subsidies by imposing steeper
duties on the goods they import.
"What we have seen is that the instruments in our toolbox are
not sufficient to deal with the huge overcapacities that result in
dumped exports on the EU market," said Daniel Rosario, a spokesman
for the EU Commission.
China attracted criticism earlier this year because of its
efforts to sell its excess production of steel to countries abroad,
including the EU. Dumping refers to the export of products by a
country at prices that are substantially lower than they are
domestically.
Europe's automotive industry could take a beating from higher
import duties on Chinese parts and intermediary products, such as
aluminum wheels. European car makers including Germany's BMW AG as
well as France's Peugeot SA and Renault SA are paying duties of
22.3% on imported Chinese aluminum wheels. That specific duty is
currently under review by the EU Commission.
"We are being hit by these punitive customs," said a person
familiar with the situation in the sector. "These are unnecessary
additional costs. It's money that we could invest elsewhere," the
person said.
Other sectors may suffer too. Wacker Chemie AG, a German
chemicals firm, exports polysilicon to China where it is used to
make solar panels, which are exported back to Europe. Some German
textile makers also worry about duties imposed on Chinese imports.
For the production of industrial textiles, many firms rely on
Chinese base material supplies.
Wacker Chemie didn't respond to a request for comment.
Even before there were discussions of a new anti-dumping
framework, exporting to the EU had already lost some of its luster
for Chinese manufacturers. When the European Commission, the
region's governing body, imposed duties of 18.4%, Jiangyin Xicheng
Steel Co. Ltd. stopped exporting to EU countries.
"Our customers cannot afford the sale price in combination with
the duty," wrote Minnie Lu, sales manager of the closely held
company near Shanghai, in an email. "The new EU framework is not
fair."
Still, the proposal needs to pass various EU legislative bodies
before it is enacted, so the Dec. 11 deadline will most likely be
missed. It could be in place by the spring of 2017.
To be sure, manufacturers that directly compete with cheap
Chinese end-products said this is an opportune time to lobby for
rules that would allow for higher duties on Chinese goods.
"We are anxious to fight distortions in the market," said
Emmanuelle Butaud-Stubbs, director general of Union des Industries
Textiles, the French textile association.
ArcelorMittal, a Luxembourg-based European steel manufacturer,
said it was too early to gauge the potential impact of the new
framework. "It's impossible to say at this stage exactly what it
looks like, and what that could mean for us," a spokesman said in
an email.
The ceramics industry, said it also suffers. There are duties of
about 17% on tableware and 28% on ceramic tiles, which are deemed
too low.
"A duty of around 30% is more successful in fending off Chinese
competition," said Renaud Batier, director general at Cerame-Unie,
the European Ceramic Industry Association.
If the EU doesn't grant market economy status to China, European
companies may face retaliatory measures, said Xu Bin, professor for
finance at the China Europe International Business School in
Shanghai.
In a statement issued Nov. 10, a day after the EC proposal was
announced, the Chinese trade ministry said the nation will retain
"the right to take all necessary means, and resolutely safeguard
their legitimate rights and interests."
European companies operating in China now fear retaliation. "A
frictional relationship will be detrimental for all parties, so
tough unilateral approaches should be avoided," said Javier Gimeno,
general delegate for Asia-Pacific at Compagnie de Saint-Gobain SA,
a French industrial company.
Write to Nina Trentmann at Nina.Trentmann@wsj.com
(END) Dow Jones Newswires
December 05, 2016 10:45 ET (15:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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