Europe split over anti-dumping shake-up

(BRUSSELS) - A planned revamp of the European Union's trade defence arsenal has sparked a fierce battle over how to deal with the growing number of EU companies shifting production to lower-cost countries like China.

EU Trade Commissioner Peter Mandelson wants to shake up the bloc's anti-dumping rules to better reflect the interests of European companies producing abroad as well as consumers and retailers in Europe.

Although he has not even brought out any formal plans, the mere whiff of reform has alarmed countries like France, Germany, Italy, Spain and Portugal, who fear it would weaken anti-dumping defences supposed to protect companies producing in Europe.

"You can't just ignore traditional industry in regions that suffer from the consequences of globalisation and offshore production," one member of the Commission said on condition of anonymity.

"The British don't have any industry any more in their country so they don't care, they think everything is services," the official said.

Despite the opposition, Mandelson can count on support from other traditionally more free-trade friendly countries such as Britain and the Scandinavian countries.

Amid such divisions, Mandelson has been forced to return to the drawing board to reconsider his proposals, repeatedly delaying their publication, now due in January.

Mandelson warned last week that to "respond to barriers with barriers of our own", Europe ultimately shoots itself in the foot since so many European companies have manufacturing operations abroad.

"It doesn't make economic sense, not least because Europe has the world's longest and most sophisticated supply chains, and a barrier that protects one part of European industry can easily hurt another," he added.

The row over so-called trade defence instruments has centred on anti-dumping rules, which allow Europe to slap duties on imports that are deemed to be produced at below their cost.

Such duties, for which Chinese-made goods are by far the biggest target, are currently decided largely according to the perceived damage which dumped imports cause rival European producers.

One idea Mandelson has floated is to extend the definition of a European producer to include not only companies that produce in Europe, but also EU-based companies that make goods in other countries.

"The EU's interests have been defined too narrowly in the past and it has been very much producer-led and by a very small number of producers," said conservative British EU lawmaker Syed Kamall, who backs Mandelson's reform.

"The definition of (EU) community interest is crucial and community interest also includes retailers and other industries that create jobs," he said.

However, opponents are concerned that giving more weight to other industries' interests would make using anti-dumping measures more difficult, rendering them useless.

"Anti-dumping procedures are a way of protecting industry," one diplomat said. "They're not made for a commissioner to contemplate various interests in the privacy of his office."

The issue of European companies shifting production abroad has become a political hot potato recently with some big companies such as aerospace giant EADS saying they have to move it abroad to cope with the strength of the euro.

At the same, European politicians -- including Mandelson -- are increasingly alarmed by Europe's yawning trade deficit with China, which is the EU's biggest trade partner after the United States.