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China's Steel Makers Face Threat of EU Anti-Subsidy Tariffs

By Bloomberg Businessweek , 2012-02-29 12:00:00

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The European Union threatened to impose tariffs on steel from China to counter alleged subsidies to Chinese exporters, bolstering a new front in the EU's battle to protect its producers.

The EU opened a probe into whether Chinese manufacturers of organic coated steel receive trade-distorting government aid, a step that may lead the bloc to impose anti-subsidy duties against China for the second time. This kind of steel is used in domestic appliances, construction, heating and furniture, among other things, according to ArcelorMittal, the world's largest steelmaker.

The investigation will determine if organic coated steel from China "is being subsidized and whether these subsidized imports have caused injury to the union industry," the European Commission, the 27-nation EU's trade authority in Brussels, said on Feb. 22, 2012 in the Official Journal. The commission has nine months to decide whether to impose provisional anti-subsidy duties and EU governments have 13 months to decide whether to apply "definitive" levies for five years.

Europe is stepping up scrutiny of alleged state aid to Chinese manufacturers, raising the prospect of more European import duties to protect higher-cost producers. Most of the EU's punitive tariffs against China punish exporters there for selling goods in Europe below cost, a practice known as dumping. China faces more EU anti-dumping duties than any other country.

Last May, the EU imposed anti-subsidy tariffs against China for the first time by targeting imports of paper with levies as high as 12 percent. The five-year duties aimed to counter subsidies to China's exporters of coated fine paper, which is used for books, brochures and magazines.

State Aid

The probe into alleged Chinese state aid to makers of organic coated steel stems from a Jan. 9 complaint by European steel industry association Eurofer on behalf of companies that account for more than 70 percent of the EU's output of the product, according to the commission, which didn't identify any companies.

In December, the EU targeted the same product in a dumping investigation against China that also stemmed from a Eurofer complaint. Brussels-based Eurofer said in November that China's share of the EU market for organic coated steel had grown to 15 percent from 0.5 percent in 2004.

Under EU practices related to dumping investigations, the commission has nine months to impose provisional anti-dumping duties and EU governments have 15 months to apply definitive levies.

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