Chinese Overcapacities Affect More Than Just Steel
The European Commission is considering a deal for the steel sector in exchange for granting China the coveted Market Economy Status (MES). This approach, which was debated by the College of Commissioners on July 20, ignores the enormous Chinese overcapacities in industries like aluminum and creates unfair distortions on the EU market, according to European trade group leaders.
“The European Commission is playing a dangerous game,” said Gerd Götz, director general of European Aluminium. “If this deal comes to pass, the EU would essentially be sacrificing its remaining manufacturing industry to save one sector.”
The EU steel crisis has distracted the debate on China’s MES from the reality that other European industries such as the aluminum sector could face the same fate, according to Götz. If the EU grants China MES, it would put 80,000 European aluminum workers at risk of losing their jobs, he said.
“A solution for one sector is no solution at all,” Götz added. “Opening the door to China by granting MES – regardless of mitigating measures – would jeopardize the EU’s long-term industrial future.”
China’s share of global primary aluminum production grew from around 10 percent to over 50 percent in just over a decade. China’s overcapacity in primary aluminum is five times the size of the EU’s entire production, according to European Aluminium. China is also ramping up production across the value chain, including in semi-fabrication where exports to the EU increased by 21 percent in 2015 and by 17 percent in 2014.
“The Chinese government systematically subsidizes strategic sectors like steel but also aluminum, solar panels, and bicycles,” said Götz. “State-supported aluminum smelters enable Chinese producers to sell at artificially low prices, to the detriment of EU companies that compete fairly and follow EU rules. The EU must therefore refrain from granting MES until it truly becomes a market economy.
“A proposal from the European Commission to grant MES to China would go against the advice of our trading partners in the United States, who recently warned China that it had not done enough to qualify for MES, particularly in steel and aluminum,” Götz concluded. “But more importantly, granting MES to China would go against the express mandate from the EU’s elected representatives in the European Parliament, who voted in May with an overwhelming majority on a resolution against doing so.”