European Aluminium expresses concern over EU’s proposal on Market Economy Status (MES) for China

The European Commission published the long -awaited proposal on China’s so-called market economy status (MES) on Wednesday, November 9. The Commission has in fact, proposed a new non-standard methodology, which will bring about crucial changes to the EU’s anti-dumping legislation. According to the new methodology no market would be classified as market economies or non-market economies. This would indirectly grant MES to China as it comes on the same platform with any other economy.

Expressing his concern over the proposal, Gerd Götz, Director General of European Aluminium, said,“Today the European Commission announced a completely new paradigm for EU trade. The question of market economy or non-market economy could virtually disappear overnight. A change of this magnitude creates significant uncertainty for European industries like aluminium.  Amidst the uncertainty around this new legal framework, the EU should ensure a strong and well-established foundation. That foundation is without a doubt the EU’s longstanding five market economy criteria. These criteria must be the cornerstone of any new methodology.”

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European Aluminium feels that in absence of effective trade defence instruments, aluminium industry in the U.S. may face the same situation like that of steel because of China’s huge overcapacity.

The Association puts up the following arguments against granting China a market economy status:

• It fails to meet the 4 out of 5 EU criteria
• Enormous subsidies: 2 Chinese aluminium companies receive 57% of total Chinese electricity subsidies
• Five-Year Plans: By 2020 China will add another 9 million tonnes of primary aluminium capacity (about three times EU capacity), despite the fact that most large Chinese aluminium smelting companies do not make any profit.

According to an independent study by the Economic Policy Institute (EPI) granting MES unilaterally may put 80,000 European aluminium jobs at risk. Total Chinese capacity in 2020 is forecasted to be equivalent to the global world demand for primary aluminium at present.  Currently, it is 5 times larger than the total EU primary production and this creates a serious imbalance in global trade.

I last one decade the total rolling capacity in China tripled to around 15 million tonnes and it is constantly increasing. Chinese rolling capacity is as large as the total demand for rolled products in the EU (5 million tonnes). On top of that, Chinese exports of semis aluminium products increased by 21% in 2015. China is exporting loads of aluminium semis to EU leaving no scope for domestic producers.

Since 2007, primary aluminium production in the EU dropped by 30% since 2007 resulting in the closure of 8 out of 24 smelters. EU is getting more import dependent for primary aluminium to satisfy the increasing domestic demand.

Since the U.S. will not grant MES to China EU should follow the same policy to maintain a fair trade policy. Over and above, primary aluminium production in China is not environmentally sound and causes huge CO2 emissions as more than 80% of China’s aluminium primary production is dependent on coal-fired power plants. So, it affects EU’s climate targets.

“Trade defence is not a question of politics but rather of rules. A rules-based trade system allows all trading partners to compete freely and fairly. If we do not hold our partners accountable, the EU risks losing valuable innovation, investments and jobs,” Mr Götz concluded.

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