An approaching World Trade Organization deadline could result in higher prices on European goods made with parts and materials imported from China.

On Dec. 11, the European Union could grant China so-called "market economy status," thereby using Chinese data for calculating duties in anti-dumping cases. Or European lawmakers could draft new rules that do away with the differentiation between market and nonmarket economies that the EU has used in the past.

The odds are against China getting the treasured title by the WTO issued deadline, said Edwin Vermulst, a partner at VVGB Advocaten, a Brussels-based law firm. "There is simply too much pressure from southern EU states and industrial sectors with a protectionist agenda to maintain or even increase the high level of duties," Mr. Vermulst said.

Based on a proposal made public last month, the European Commission is on a mission to change its anti-dumping and antisubsidy framework in favor of more stringent rules.

This raises concerns for finance chiefs whose firms have outsourced part of their supply chain to China, according to Stephen Adams, a partner at Global Counsel LLP, a consultancy based in London. "When you have outsourced…to China, you see duties as a cost factor and not as protection," he said.

A new slate of European rules is likely to discourage Chinese companies from dumping products in the EU and punish those that benefit from Chinese government subsidies by imposing steeper duties on the goods they import.

"What we have seen is that the instruments in our toolbox are not sufficient to deal with the huge overcapacities that result in dumped exports on the EU market," said Daniel Rosario, a spokesman for the EU Commission.

China attracted criticism earlier this year because of its efforts to sell its excess production of steel to countries abroad, including the EU. Dumping refers to the export of products by a country at prices that are substantially lower than they are domestically.

Europe's automotive industry could take a beating from higher import duties on Chinese parts and intermediary products, such as aluminum wheels. European car makers including Germany's BMW AG as well as France's Peugeot SA and Renault SA are paying duties of 22.3% on imported Chinese aluminum wheels. That specific duty is currently under review by the EU Commission.

"We are being hit by these punitive customs," said a person familiar with the situation in the sector. "These are unnecessary additional costs. It's money that we could invest elsewhere," the person said.

Other sectors may suffer too. Wacker Chemie AG, a German chemicals firm, exports polysilicon to China where it is used to make solar panels, which are exported back to Europe. Some German textile makers also worry about duties imposed on Chinese imports. For the production of industrial textiles, many firms rely on Chinese base material supplies.

Wacker Chemie didn't respond to a request for comment.

Even before there were discussions of a new anti-dumping framework, exporting to the EU had already lost some of its luster for Chinese manufacturers. When the European Commission, the region's governing body, imposed duties of 18.4%, Jiangyin Xicheng Steel Co. Ltd. stopped exporting to EU countries.

"Our customers cannot afford the sale price in combination with the duty," wrote Minnie Lu, sales manager of the closely held company near Shanghai, in an email. "The new EU framework is not fair."

Still, the proposal needs to pass various EU legislative bodies before it is enacted, so the Dec. 11 deadline will most likely be missed. It could be in place by the spring of 2017.

To be sure, manufacturers that directly compete with cheap Chinese end-products said this is an opportune time to lobby for rules that would allow for higher duties on Chinese goods.

"We are anxious to fight distortions in the market," said Emmanuelle Butaud-Stubbs, director general of Union des Industries Textiles, the French textile association.

ArcelorMittal, a Luxembourg-based European steel manufacturer, said it was too early to gauge the potential impact of the new framework. "It's impossible to say at this stage exactly what it looks like, and what that could mean for us," a spokesman said in an email.

The ceramics industry, said it also suffers. There are duties of about 17% on tableware and 28% on ceramic tiles, which are deemed too low.

"A duty of around 30% is more successful in fending off Chinese competition," said Renaud Batier, director general at Cerame-Unie, the European Ceramic Industry Association.

If the EU doesn't grant market economy status to China, European companies may face retaliatory measures, said Xu Bin, professor for finance at the China Europe International Business School in Shanghai.

In a statement issued Nov. 10, a day after the EC proposal was announced, the Chinese trade ministry said the nation will retain "the right to take all necessary means, and resolutely safeguard their legitimate rights and interests."

European companies operating in China now fear retaliation. "A frictional relationship will be detrimental for all parties, so tough unilateral approaches should be avoided," said Javier Gimeno, general delegate for Asia-Pacific at Compagnie de Saint-Gobain SA, a French industrial company.

Write to Nina Trentmann at Nina.Trentmann@wsj.com

 

(END) Dow Jones Newswires

December 05, 2016 10:45 ET (15:45 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
ArcelorMittal (EU:MT)
Graphique Historique de l'Action
De Fév 2024 à Mar 2024 Plus de graphiques de la Bourse ArcelorMittal
ArcelorMittal (EU:MT)
Graphique Historique de l'Action
De Mar 2023 à Mar 2024 Plus de graphiques de la Bourse ArcelorMittal