EU announces fresh anti-dumping duties on Russian and Chinese steel

imports
The European Commission has imposed more anti-dumping duties on Chinese and Russian steel imports
and has applied the penalties retroactively for the first time, in a fresh move to protect the bloc’s
producers.

The duties on cold-rolled steel, which is used to make cars and washing machines, range up to 22.1 per
cent for Chinese imports and up to 36.1 per cent for Russian imports. The rates are a little higher than
provisional penalties in place since February.
The European steel industry has long called for tougher EU anti-dumping duties, which aim to protect the
bloc’s companies from ultra-cheap imports. Using a different calculation method, the US imposed tariffs
in excess of 500 per cent on similar cold-rolled steel materials from China earlier this year.

The commission is planning further measures that would allow it to impose US-style tariffs against steel
that is dumped at particularly low prices or subsidized.
“This shows the EU is starting to tackle the state-supported dumping of steel into the UK, but it’s still
being outmuscled by Uncle Sam,” said Dominic King, head of policy at UK Steel, an industry group.
Britain will need its own tariff regime once it leaves the EU to ensure that China and Russia do not
“destroy” the UK steel industry, he added.

The duties follow a formal complaint in April 2015 from European steel groups, who argue that surging
imports from China are to blame for last year’s price collapse. Steel prices have been rising throughout
most of this year.
Cut-price steel imports have become a particularly politically sensitive topic in Europe and the US as
western leaders face a popular backlash against globalization. In Britain, 11,000 jobs are in jeopardy as
efforts continue to rescue lossmaking factories owned by Tata Steel, which has partly blamed China for
its problems.
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Steel: Industry feels the heat

Producers look to survive by moving into more flexible and specialised operations
Cold-rolled steel is used in the production of packaging and white goods, as well as in the construction
and motor industries.

China’s commerce ministry said it regretted the commission’s decision, adding that the EU should “avoid
abusing trade remedies and sending a wrong signal” to the world. “This move amplifies legal uncertainty
and gravely affects normal international trade,” the ministry said.
The tariff will be levied retroactively on imports registered in the two months before the provisional
duties were applied. This is seen as a warning to steel importers to avoid stockpiling in future.

European data suggest the average monthly volume of imports from China and Russia range between
roughly 120,000 tonnes and 162,000 tonnes. The retrospective duties assume imports of 165,000 tonnes
per month.
“In the wake of the global steel overcapacity crisis, the commission is applying the trade defence
instruments to re-establish a level-playing field between EU and foreign producers,” the EU executive
said.

Although EU leaders have repeatedly pressed Beijing to curtail overcapacity in its steel industry, the
sector remains a huge employer at a time when economic growth in China is slowing down.
The duties target manufacturers including Angang Steel Company in China as well as Russian operators
Magnitogorsk Iron & Steel Works and Severstal.
Commentary Number 3

Protectionist measures are taken into account by many countries around the world. In order to
guarantee other countries do not harm domestic economies. When there is free Trade and no
barriers are used to control the exchange of goods and services between countries, government
and international organizations like the World Trade Organization (WTO) take some measures.
This organization is in charge of setting the rules for trade, making them as simple as possible
and very few barriers. Nevertheless, most countries trade in order to get lower prices, greater
choice, and increase competition in their economy. In addition, this has to do with the resources
a country has and how they are able to take advantage and use them efficiently. The article “EU
Imposes Fresh Anti-Dumping Tariffs on Chinese Steel”, is affecting steel makers in Europe due
to overcapacity in production.

The action taken by the EU reflected directly on the domestic producers affected by the
imports of cold-rolled-steel from China. This steel is generally used to make cars and washing
machines. Prices in the European market are low due to dumping. In the article, we can see that
the main reason to put the tariff is to avoid dumping from China. Dumping is presented when a
country sells a commodity or product at a price lower than its production cost in another country.
This means that the labour force in China is paid very low. The European commission needs to
be authorized by the WTO to be able to impose anti-dumping tariffs. As the article shows, in the
UK there are 11,000 jobs are in danger, and they argue that the price collapse of occurred
because of the increasing imports from China. To solve this problem the European Steel Industry
decided with the European anti-dumping duties to impose a tariff on cold-rolled-steel imported
from China and Russia. A tariff is a tax imposed on imported goods, in order to protect domestic
producers.
Quantity of cold-rolled-steel
 P S (Domestic)
r
i
c
e

P
e
Pw + S (World)
T g + Tariff
f h i j k
Pw S (World)
b c d e
a D

0 Q1 Q3 Qe Q4 Q2

Figure 1.1 Tariff imposed by the EU to Chinese steel producers

In the diagram above, after the EU imposes the tariff on imports of steel from China, it
shifts the S (World) upward by the size of the tariff. In this case, it is imposed by the European
government to the foreign producers from China. In this order of ideas, before the tariff 0Q1 was
produce by domestic producers. Q1 and Q4 were the imports at that time. When the tariff is
imposed the price rises from Pw to Pw + T, the quantity demanded decreases from 0Q2 to 0Q4,
due to the increase in price. Moreover, the result of this is the rise in revenue of domestic
producers from a to a+b+f+g+i. The rest is supplied by the foreign producers Q3 to Q4. The
tariff foreign producers need to pay to the government is Pw +T, so they only receive as revenue
c+d. The rest is for the government who receives Tariff revenue of h+j.

To continue, the tariff has some implications on the demand of steel in the EU caused by
the increase in price, as the cost of production is higher. From the diagram on Tariff consumers
will not spend the e they were going to spend before, and there is a consumer surplus in k. The
high price of steel in Europe is due to the production of inefficient steel producers. This can be
seen in the h, which shows a loss of world efficiency, due to the inefficient use of the world’s
resources. The effect of the tariff is less choice for consumers and a diminished in competition.
 S
P
r Excess Supply
i
c P1
e
P
e

D
0 Q1 Q Q2
e Quantity
Figure 1.2 Increase in the price of steel for Demand and supply

In this diagram it is clear that the price increases due to the Tariff on foreign producer of
steel. Consumers in Europe will decrease their quantity demanded from Q to Q1, and pay a price
P1. On the other hand, producers will increase the quantity supplied from Q to Q2 because of the
increase in price. This causes an excess of supply as there is more quantity supplied than what
people are willing and able to purchase.

In conclusion, the use of a tariff to prevent dumping in China and protect domestic
producers in Europe is one of the measures most countries use. For this reason, it is relevant to
say that it can have positive effects regarding the domestic production in countries, as companies
are able to sell their products without competing with international markets. However, it can
have negative effects as it can affect consumers due to the increase in price and less choice for
consumers, getting less competitive products.