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China is by far the world’s biggest producer of both steel and aluminium. Photo: AFP

US and EU strike metals pact to take on China’s ‘steel dumping’

  • US President Joe Biden says agreement will restrict market access for ‘dirty steel, from countries like China’
  • ‘Melt-and-pour’ mechanism to ensure supplies are clearly labelled throughout the production cycle, US official says
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The European Union and United States announced a new metals alliance on Sunday that US President Joe Biden said would “restrict access to our markets for dirty steel, from countries like China”.

On the sidelines of the Group of 20 summit in Rome, Biden said the agreement was aimed at “countries that dump steel on our markets, hammering our workers and harming them badly, both the industry and the environment”.

China is by far the world’s biggest producer of both steel and aluminium and has, for decades, been accused by the United States and governments in Europe of flooding markets with cheaper – and often subsidised – product.

EU commissioner for trade Valdis Dombrovskis said the intention was to “invite like-minded economies to participate in this arrangement and to work towards the shared goals of addressing global overcapacity, in the steel and aluminium sectors”.

“We hope to restrict market access for non-participants who do not meet conditions for market orientation or do not meet the standards for low-carbon intensity products,” Dombrovskis said. “But we will do this compatible with our international obligations and multilateral groups.”

China’s curbs on steel production, pollution and energy consumption send iron ore prices tumbling

An EU official involved in developing the plan said it was aimed at eliminating “market distortions” caused by issues such as state subsidies in the sector.

A US official said that the agreement would include a “melt-and-pour” mechanism to ensure steel was clearly labelled throughout the production cycle so “Chinese steel doesn’t get transshipped or doesn’t get utilised in European steel products that come into the United States and therefore – thereby allowing Chinese steel into the US through the back door”.

The US Commerce Department said it was already “consulting closely” with Britain and Japan on steel and aluminium issues, “with a focus on the impacts of overcapacity on the global steel and aluminium markets, the need for like-minded countries to take collective action to address the root causes of the problem, and the climate impacts of the sectors”.

02:17

Trump’s protectionist campaign promise: trade tariffs on steel and aluminium imports approved

Trump’s protectionist campaign promise: trade tariffs on steel and aluminium imports approved
Late on Saturday, the EU and US secured a ceasefire in their own years-long trade dispute over steel and aluminium tariffs, which EU officials hoped would eventually be permanently ended through the new metals alliance.

Dombrovskis said tariffs on US metals introduced during the administration of former US president Donald Trump would be eroded and replaced by quota-based duties in line with trade flows.

The initiative dovetails with the EU’s broader push for decarbonisation among its trading partners.

The EU official compared the new deal on steel and aluminium to the Carbon Border Adjustment Mechanism (CBAM), a proposed carbon tariff on carbon-intensive products, such as cement and electricity imported by the EU, which has angered China.

China raises steel export tariffs again in bid to boost carbon neutral goal

“It is the same idea as CBAM, in that everybody has to pay the same costs for decarbonisation,” the official said, adding that nobody would be excluded from the initiative if they met the criteria.

Officials also said the EU and US would pause their World Trade Organization lawsuits against each other, but not withdraw them completely since “it is clear that the threat has not disappeared”.

The agreement marks a new area of cooperation in the transatlantic alliance that appears to target China, and Biden framed it as such. In September, the two parties launched a Trade and Technology Council to strengthen supply chains and develop next-generation technology such as artificial intelligence.

Biden said at a press conference held close to midnight in Rome on Sunday that the new arrangement “will immediately remove a point of significant tension with our friends in the European Union, and rejects the false idea that we cannot grow an economy and support American workers while tackling climate crisis at the same time”.

Valdis Dombrovskis is the European Union’s commissioner for trade. Photo: EPA-EFE

While China was not named, the agreement refers to “shared democratic values”, “non-market economies that are undermining the world trading system” and “misuse” of artificial intelligence technologies that threaten “fundamental freedoms”.

Ali Wyne, an analyst on US-China relations at the Eurasia Group, said the Biden administration was hopeful of making “incremental steps” with the EU towards “gradually limiting Beijing’s ability to drive wedges between Western democracies” – even if there was not much hope of a “unified transatlantic approach” on China.

“Barring a significant recalibration in China’s foreign policy, transatlantic alignment seems poised to grow, even as it is likely to remain selective and halting,” Wyne said.

Additional reporting by Robert Delaney

This article appeared in the South China Morning Post print edition as: U.S. and E.U. strike metals pact to take on ‘China’s steel dumping’
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