The European Union has filed a laundry list of complaints against Chinese dumping, from shoes to fasteners. Ceramics, for example. Household ceramics got hit last week. In 2011, it was building ceramics. In 2010, it was ceramic tiles, which led to a punitive tax of 69.7%—punitive for consumers who ended up having to pay higher prices, though it was a nice gift to European producers. Now, it has chosen another target, Chinese steel. But with nearly half of the world’s steel production, the Chinese steel industry is the bully on the block. And it flexed its pumped-up muscles—putting at stake the very manna that European officials have been praying for.
Rumors of the Chinese savior appearing on the horizon goosed financial markets innumerable times. China, out of the goodness of its big heart, would use its $3.2 trillion in foreign exchange reserves to bail out the Eurozone with the stroke of a plastic pen. Turns out, China didn’t have a big heart but a list of unpalatable demands—so unpalatable that even a desperate European panhandling delegation sent to Beijing in November turned them down.
Ten days ago, another top-level EU begging expedition tried to lure Premier Wen Jiabao into plowing part of China’s foreign-exchange trillions into the European bailout fund, a dreadfully convoluted and opaque creature that they passed off as a rose. But rather than kick the conniving beggars out, Wen declared soothingly that Europe was an important partner, and that China and the EU would work together to solve the debt crisis—and the delegation left once again empty-handed.
But yesterday, it was brutal. It was an unnamed official at the Commerce Ministry who slugged the EU and everyone who was still steeped in some sort of hope that China would, out of the goodness of its heart, bail out debt sinner countries in the Eurozone.
The trigger: earlier this week, the European Commission opened an anti-subsidy investigation of Chinese organic-coated steel (galvanized and pre-painted) of the type used in household appliances. In December, the Commission had already launched an anti-dumping investigation of the same products. Two separate investigations and two complaints with the World Trade Organization on the same products.
The instigator: Eurofer, the European Steel Association. In January, it whined to the Commission about Chinese steelmakers that didn’t respect the rules of free trade—they received a range of subsidies, such as tax exemptions, preferential loans, and below-market cost of materials that the government purchased for them.
The European steel industry is in trouble. Demand cratered. Producers from ArcelorMittal to ThyssenKrupp have shut down steel mills to prop up prices—but all it did was invite Chinese steelmakers.
And they’re desperate. After years of explosive growth, they’re facing colossal over-capacity, just as demand is slumping. Premier Wen Jiabao acknowledged the problem during a visit to Hunan, where much of the steel is made, and he exhorted the industry to consolidate. So the trade complaint came at a very inconvenient moment.
“Launching an anti-subsidy investigation at this time sends the wrong signal of trade protectionism that will not only cast a shadow over China-EU steel trade, but also damage China-EU efforts to respond to the crisis,” said the unnamed Ministry of Commerce official. “With … many European countries deeply trapped by the sovereign debt crisis, all countries should have a more open, cooperative and forgiving attitude in facing the crisis.”
Open, cooperative, and forgiving towards China—the new rules that China is imposing on the game. Or perhaps just a re-write of very ancient rules. Those with the money get to set the terms when those who need it are desperate. Remains to be seen if someday the Eurozone will be desperate enough for Chinese money to compromise on the support for its coddled industries.
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.
When Europe created the euro and price it high to keep inflation low they forgot that a high euro exports jobs and jobs pay income tax and keeps the balance sheet in clean condition, however if Europe made a peg to the dollar from the beginning and lower the taxes on energy products and kept real presure on the commoditie traders it would have been a powerhouse today, and exports and Europe as a vacation destination would have easy taking care of their governments overspending.
so and how are they fixing their problems, their are not. but making a peg to the dollar and canadian dollar would make a beginning .
and a haircut for all bond holders in Europe to make up for the loss in euro value. and remember do not worry bondholders will be back.
The author's tone and use of loaded words like "whine" suggest he is one of the global-free-market-nirvana crowd – the invisible hand will save us all. He needs to take a bigger picture view and realize that China is using dumping and subsidizing to destroy western companies/industries. They do this as part of a bullet-free war being waged on the west. The athor's infatuation with cheaper prices – IN THE SHORT TERM – shows that he is not taking his ADD/HD (attention deficit disorder with hyperactivity disorder) medicine, as he is not realizing just how crappy life will be once all western countries are 100% totally beholden to China for everything manufactured. China has shown time and time again that they WILL use that advantage to manipulate political agenda's. IT'S NOT ALL JUST ABOUT MARKET EFFICIENCY STUPID!!! There's more to the big picture that that!
And the cheapest way – per the budget – is not always the best way for a society to manage its affairs. Not every right-thing-to-do generates a profit on a quarterly returns ledger.
Read a history book, learn something, and pull your head outa your butt. You frickin Keynesians are going to destroy the world.
I do not believe China ever asking the western world to manufacture in China, , the western worlds thinking was let cheap labor work for us and our pensions, and pulled China in to its global project, however the Chinese government does need to take care of its 1.35 billion people, something western corporations would not do., and now it has become a blame game of who steals more or stimulates /subsidise, protect more ext ext.
But if Steven would spend a little vacation in China he could see what it really means to have 1.35 billion people on the same land size as the U.S.A.