EU stops short of backing Commission on strong trade defenses

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EU leaders agreed Friday that Europe needs more “robust” protections — saying they were crucial to counter rising “populism” — but backed away from approving a weapon many countries see as essential to the bloc’s arsenal.

European Council President Donald Tusk said the leaders, meeting in a summit in Brussels, had agreed to modernize their “trade defense instruments” to defend the bloc against unfair practices, though they left the specifics for another day.

The talks on trade were part of a half-day summit session that took place as the bloc tried to salvage a foundering agreement with Canada.

“Our citizens are increasingly concerned about whether the trade deals we negotiated are in their best interest,” Tusk said. “And I am afraid that we will not be able to continue to negotiate free trade agreements if we do not prove in practice that we are very serious about protecting European consumers, workers and companies.”

Tusk said leaders had “committed to reach an urgent agreement on the modernization of all the EU trade defense instruments and we have tasked our trade ministers with breaking the deadlock.”

But that statement masked disagreement over how strong those instruments should be, with some countries opposing giving the European Commission the power to impose harsh duties in cases of dumping — especially on steel.

The issue has taken on increasing importance as China is about to claim its right to market economy status as a member of the World Trade Organization.

Some European industry sectors — including steel and aluminum — worry that once China is considered a market economy Brussels won’t be able to impose tariffs able to defend them against alleged dumping of Chinese products on the EU market.

In a related move, the Commission is expected to propose by mid-November a new set of anti-dumping regulations to safeguard European industries after China gets the new status on December 11.

Despite the strong wording in the summit conclusions, the leaders did not seem to bend to the Commission’s push to act on the so-called lesser duty rule, which has restricted the EU’s ability to impose the kind of high tariffs on dumped goods that the U.S. is able to do — in some cases as high as 300 percent.

Juncker said after the meeting that it was important to give the Commission more power to act in dumping cases.

“I’m strongly against stupid, basic protectionism,” he said. “But I cannot accept that the Americans and others are protecting their industry and we are naïve guys wanting to charm the others.”

Under the complex requirements of the lesser duty rule, the EU does not usually impose duties to recoup the full sum by which dumped imports undercut production prices. Instead, the EU normally hits dumping companies with a far lower penalty, calculated only to counter any actual harm to European businesses.

“The Council [needs] an urgent and balanced agreement on the comprehensive modernization of all trade defense instruments by the end of 2016,” the conclusions read.

An earlier draft of the conclusions seen by POLITICO included a reference to the lesser duty rule. But the reference was removed Friday, a sign that the blocking minority lead by the U.K. remains unconvinced.

The European Commission first proposed a reform of the EU’s trade arsenal, including the lesser duty rule, in 2013.

The reform has been blocked at technical level discussions ever since due to the resistance of a group of countries led by the United Kingdom that includes the Netherlands, Sweden and the Czech Republic.

Earlier this week a communication by the Commission urged EU member countries to find a compromise on the lesser duty rule and waive it in “well targeted and specific circumstances of overcapacities and/or raw material distortions.”

The conclusions stated that overcapacities in certain sectors require the Council to find “an urgent and balanced agreement … on the comprehensive modernization of all trade defense instruments by the end of 2016.”

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