EU nears potential breakthrough on tougher China tariffs

A volte-face by the Netherlands increases the chances of Europe imposing higher tariffs.
By HANS VON DER BURCHARD AND ALBERTO MUCCI
France and Germany are leading in pushing for the far higher levels of tariffs more typical of the U.S., as they seek to protect industries from a tide of cheap Chinese imports

EU countries are closing in on a deal that will enable them to slap higher tariffs on dumped Chinese goods.
Reforms to introduce higher duty levels have long been opposed by a British-led blocking minority of mainly northern European states including Ireland, Sweden, Finland and the Netherlands. 

They have argued against a stronger EU tariff system by saying that European manufacturers higher up the value chain will be harmed by more expensive raw materials.
France and Germany are leading a group of 14 countries in pushing for the far higher levels of tariffs more typical of the U.S., as they seek to protect industries such as steel, ceramics and textiles from a tide of cheap Chinese imports.
European Commission President Jean-Claude Juncker has complained that tariffs against dumped Chinese steel of more than 250 per cent are not uncommon, while the EU’s system often leads to duties less than a 10th of that level.
There was some unexpected movement on this long-frozen dossier on Friday at a meeting of trade ministers in Brussels after the Netherlands, previously a key country in opposing a toughening of trade defense legislation, hinted at willingness to switch sides.
“We will look into the proposals … with a positive frame of mind,” Dutch trade minister Lilianne Ploumen told reporters after the meeting.
A proposal for tariff reform has been stalled since 2013. 

But the debate has now gained additional urgency because China will style itself as a “market economy” from December 11, meaning that it will become even harder to prove dumping.
Diplomats added that Croatia had joined the Netherlands in now being open to consider to a change of EU trade defense strategy. 

This leaves the remaining ultra free-traders such as the U.K. and Sweden increasingly isolated.
“There is a clear recognition that we need to move forward,” said French Trade Minister Matthias Fekl. 

“We could not reach a clear majority [for the reform] today, but we will still get it this year. We have to.”
Peter Žiga, economy minister of the Slovak Republic that currently holds the EU presidency, said discussions will continue “at the technical and ambassador level and get to an agreement.”

Duty calls
The reform centers on a quirk of EU trade policy called the “lesser duty rule.” 

This means that the duty imposed rarely reflects the absolute difference between a dumped price and the cost of production. 

Instead, the tariff is pitched far lower and only aims to remove any actual harm to European businesses caused by the dumped good.
Ploumen, the Dutch minister, said that part of her government’s change of position was based on a demand from the Dutch parliament this week “that we need a real quick reform, including the lesser duty rule.”
The Slovak Presidency proposed this week a new compromise solution on the lesser duty rule that defined specific cases in which the rule could be waived.
However, Italy triggered debate at Friday’s meeting by raising objections to that proposal, diplomats said.
“Italy has reservation on the entire structure of how the lesser duty rule will be waived,” a source close to the discussions said, adding that the “watered down version [of the lesser-duty rule] does not give enough assurance to Italy,” a source close to the discussions said.
A reform of the lesser-duty rule is seen as crucial for the success of an additional trade defense proposal, which was made by the Commission on Wednesday to change the methodology for calculating anti-dumping tariffs.
Ministers also discussed this proposal during their meeting, but said it was to early to draw any conclusion.