German engineering body urges broader EU duties, tougher action on China

By Miranda Murray and Rene Wagner

BERLIN, July 15 (Reuters) - Germany's VDMA engineering body on Wednesday urged swifter and more forceful action by the EU against what it called unfair competition from China, recommending countervailing duties on product groups and a change to how trade cases are evaluated.

In an updated position paper, the industry group said the European Commission's current practice of investigating market distortions product by product was too slow to address competitive disadvantages faced by European manufacturers.

Market distortions by Chinese firms have been extensively documented, and the European Union now needs to take stronger action to ensure a level playing field, VDMA said.

"We must not allow ourselves to become pawns in a game of subsidies, dumping and currency manipulation," said VDMA President Bertram Kawlath, who will press the message this week in Brussels.

China has been increasingly relying on exports to drive growth and compensate for internal weakness that has hobbled economic growth in the world's second-largest economy.

The EU's goods trade deficit with China, which now amounts to some €1 billion ($1.15 billion) per day, has led the 27 EU members to recognise that there is a problem, according to EU diplomats. 

EU leaders debated last month whether tougher measures are needed to curb the trade deficit and the bloc's heavy reliance on China for rare earths and other critical supplies. 

MORE MARKET SURVEILLANCE, CHANGES TO BURDEN OF PROOF

VDMA said that countervailing duties should be applied at the product-group level, on construction machinery for example, wherever there is evidence of unfair competitive practices. 

The EU Commission currently investigates market distortions on a product-by-product basis.

"It would take decades to level the playing field and eliminate all unfair competitive advantages. We don't have that much time," said VDMA's foreign trade policy head, Oliver Richtberg.

The EU should also consider reversing the burden of proof for countervailing duties, with Chinese companies being required to prove that they are not benefiting from unfair practices rather than EU companies outlining how they are disadvantaged, said VDMA. 

However, VDMA is against import quotas that impose high additional tariffs on imports exceeding those quotas, as these can affect third countries by influencing trade dynamics and prices.

Revenues from trade defence measures should be used to support innovation and firms hit by Chinese countermeasures, it said.

(Reporting by Miranda Murray, Rene Wagner and Kirsti Knolle; Editing by Thomas Derpinghaus)