Communication from the Commission to the European Parliament, the European Council and the Council

Towards a robust trade policy for the EU in the interest of jobs and growth

In the modern global economy, trade is essential for growth, jobs and competiveness, and the EU is committed to an open rules-based trading system. Exports now support almost one in seven manufacturing jobs in Europe (i.e. more than 30 million jobs – two thirds more than 15 years ago), while imports are a major source of productivity gains and allow consumers to benefit from access to more choice and lower cost products. Production in the EU is dependent not only on energy and raw material imports, but also on parts, components and capital goods like machinery. Together, these products make up 80% of EU imports.

However, we are not naïve. Free trade must also be fair, and unfair trading practices, such as dumping and subsidisation by foreign producers and governments cause serious harm to EU industry and workers, undermining support for free trade, which is already under attack from many directions. For the Commission, this issue is about making globalisation work fairly for the benefit of all.

The challenge of unfair trade practices by third countries is getting more acute. Government intervention, massive subsidies and policies that distort prices have resulted in huge overcapacities and ultimately in dumped exports on the EU market. This year has seen massive overcapacities harm the EU steel sector. The steel overcapacity in China alone has been estimated at around 350 million tonnes, almost the double of the Union's annual production. Steel imports from China to the EU have surged in the last three years. Market prices for some steel products fell by up to 40% due to the surge of volumes, particularly damaging in the steel sector which has seen 40.000 jobs lost since the beginning of the financial crisis.Overcapacities are also developing very fast in other sectors, for instance aluminium. China has almost 10 million tons of excess aluminium capacity, doubled from five years ago, boosted by subsidised energy (which represents up to 40% of the aluminium production cost).

In addition, the higher duties imposed by other major World Trade Organisation members can lead to trade diversion of dumped products into the EU market, further exacerbating the problem.

Faced with massive overcapacities flooding the EU market, the European Commission has taken an unprecedented number of anti-dumping and anti-subsidies measures. Around 315,000 jobs in Europe have been protected, primarily in the iron and steel, chemical and allied industries, ceramics and mechanical engineering sectors. In the steel sector alone, the EU already has 39 anti-dumping and anti-subsidy measures in place to protect our steel industry from unfair competition, 17 of those concern China. Within the limits of existing EU law, the Commission has been deploying the full force of the existing Trade Defence Instruments, including registration of imports, increased transparency, faster imposition of measures, as well as – exceptionally - initiating cases on the basis of threat of injury.

However, we have reached the limit of what is feasible under the existing EU trade defence legislation to rein in external overcapacities and dumping. In order to preserve European jobs and ensure fair competition in open markets it is of crucial importance that the EU's trade defence instruments are effective in the face of these global challenges. This is why the 2013 Commission proposal to modernise trade defence instruments must be adopted as a matter of urgency.

In addition, the international legal framework is changing as certain provisions on dumping calculations in the Accession Protocols of China, Vietnam and Tajikistan to the World Trade Organisation will shortly expire. The Commission envisages further amendments to the current EU Trade Defence legislation, including a new methodology for calculating dumping, allowing for action on newly revealed subsidies and ensuring an orderly transition to the new situation.

The Commission believes it is now imperative for the EU's Trade Defence Instruments to be updated, strengthened and made legally more robust.