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EU, China in Showdown on Tariffs - WSJ.com
It sucks we have to put up with those tariffs for another 6 long years before we're automatically recognized as a market economy.
Good to see China moving up the value chain though, and how Chinese factories use less labor and higher technology than European ones.
The West used to (and still do) complain Chinese companies using 'slave labors', now they're complaining we buy cheaper materials (we sure do because we're the biggest buyer of resources thus have the biggest bargaining power. Is economy of scale now a crime?). Maybe in the next decade they'll complain we're using too much automation and enact robot rights law to stop the Chinese from abusing enslaved robots.
LANDAU, Germany—The European Union is expected to raise punitive tariffs on imports of Chinese-made aluminum car wheels in a dispute that shows how China's shift into more sophisticated manufacturing is increasing tensions with some of its most important trading partners.
A special EU trade committee is to vote Tuesday on a measure that would extend antidumping duties in place since May and raise them to 22.3% from 20.6%. People familiar with the committee's thinking say it is likely to approve the move, which then must be ratified by EU governments.
A new round of tariffs could spark an automotive trade war with China—a prospect that could hurt European car makers such as Daimler AG and Volkswagen AG, for which China's booming auto market has become a major source of profits.
"Trade disputes with China used to be about bras, T-shirts, shoes and ironing boards," says Simon Evenett, a professor of trade economics at the University of St. Gallen in Switzerland. "Now they're moving downstream, and increasingly, they're going to be about cars."
But the trade picture on autos is far from black and white. Europe's auto makers and parts companies are deeply divided over the tariff move, with car manufacturers lobbying fiercely against the measure, and producers of components campaigning in favor.
Here in Landau in southern Germany, wheel maker Ronal AG's highly automated factory employs 480 people, who work molding and polishing aluminum wheels for high-end cars. The plant churns out two million wheels annually.
Ronal has pushed hard for the antidumping tariffs. Oliver Schneider, a sales manager at the company, says: "We need these duties if we want to keep growing our business."
Without the tariffs, the company says, jobs for workers in the Landau factory and at other plants across Europe that together produced 10 million wheels last year could be lost. Because of Chinese competition, Ronal says, it hasn't opened a new plant since 2006.
Ronal and other wheel makers are at odds with many of their big customers in Europe. Auto makers say the tariffs risk reprisal by the Chinese, which could hurt car and auto-part exports to China, the world's fastest-growing major automotive market, and also drive up the cost of vehicles in Europe.
"Without China, a car company has no future," says a Brussels-based car-industry lobbyist. China is the world's largest vehicle market, having surpassed Japan and the U.S. in recent years, and is continuing to expand at a rapid pace.
The EU exported $5 billion of auto parts to China in 2009, a market that is expected to continue growing strongly. Exports of vehicles have also increased. German exports of vehicles to China, for example, more than doubled between 2004 and 2009.
In the aluminum-wheels dumping case, China denies exporting unfairly or at a loss. "The price of Chinese wheel exports is much higher than that of domestic sales, which means Chinese wheel exports are not dumped," says Li Xiaoqing, an official at the China Association of Automobile Manufacturers.
When antidumping duties were first levied on wheels in May, China's Ministry of Commerce said the EU was violating World Trade Organization rules. And the Chinese side has said it will retaliate. "Of course, we have our countermeasures to take if the EU insists on extending the duties," says Mr. Li.
There is a precedent. Last year, Beijing immediately raised tariffs on U.S. poultry and auto parts after the Obama administration increased duties on Chinese tires.
That is a troubling prospect. As in the U.S., cars are still at the heart of European manufacturing. EU exports of car parts alone were around $100 billion last year, including trade among EU countries. And the EU is battling Asia for the future of the industry.
Wheels are, of course, a key auto part, although a set of four costs less than $150. They have traditionally been made out of steel, but since the 1970s, car makers have increasingly used aluminum, which costs a bit more but is lighter and can be sculpted into svelte, aerodynamic shapes.
As China has moved steadily into auto manufacturing in the past decade, it has ramped up production of auto parts. By last year, it had become the world's biggest exporter of car wheels, shipping out $2.4 billion of them, almost all to the U.S., Japan and Europe.
European imports of Chinese aluminum wheels increased to 53,000 tons in 2008 from 9,400 tons in 2003, according to EU documents that are part of the tariff case.
China's share of the overall European aluminum-wheel market is 10%, according to the documents, but most of that is wheels sold as replacement parts to car owners.
In the market for supplying car factories, Chinese market share was only 3%. But even in that market, Chinese influence is felt, according to people in the industry, who say that low bids by Chinese suppliers have forced European wheel makers to shrink profit margins sharply.
To prove dumping, complainants in trade cases must show that the product in question is being produced unfairly below reasonable cost, and that it is putting domestic producers out of business, a concept termed "injury."
The price of aluminum makes up roughly 50% of the cost of an aluminum car wheel, according to people in the industry. Wheel producers outside China buy aluminum by paying the price set by the London Metal Exchange.
European wheel makers say Chinese companies benefit from subsidized aluminum. European Commission investigators agreed, concluding that "the Chinese state has a primary role in the setting of prices of primary aluminum and interferes in the market continuously with a number of tools."
Injury is usually argued with data showing soaring market share. Not this time. European wheel producers instead pointed to their own shrinking margins.
Low Chinese prices have pushed margins down to 3.2% from a previous 7% to 10%, European wheel producers say.
Ronal and other European companies have tried to increase automation in an effort to compete. But their factories still lag behind those in China in terms of manufacturing technology.
In the Landau factory, project manager Jurgen Becker watches giant pincers remove a wheel from a polishing machine. "A factory in China is probably the same, but with fewer people and more robots," he says.
It sucks we have to put up with those tariffs for another 6 long years before we're automatically recognized as a market economy.
Good to see China moving up the value chain though, and how Chinese factories use less labor and higher technology than European ones.
The West used to (and still do) complain Chinese companies using 'slave labors', now they're complaining we buy cheaper materials (we sure do because we're the biggest buyer of resources thus have the biggest bargaining power. Is economy of scale now a crime?). Maybe in the next decade they'll complain we're using too much automation and enact robot rights law to stop the Chinese from abusing enslaved robots.
