China has been told rather bluntly that it has to close down its steel mills that are dumping their excess production in Europe or face its admission to the World Trade Organization blocked. Jean-Claude Juncker, the President of the European Commission conveyed this message in a joint press conference with European Council President Donald Tusk in Beijing, China.

"I do not want to dramatise this issue, although it could easily be dramatised. But for us there is a clear link between the steel overcapacity of China and the market economy status for China," he said at the news conference.

More about the steel industry

"The EU will defend its steel industry. We are not defenceless, and we will use all the means at our disposal, " Juncker said in Beijing after talks with the Chinese government according to The Guardian.

Juncker said that he had explained to his Chinese colleagues that the overcapacity in steel production is a very serious problem for Europe and the Europeans. "The overcapacity of China is exactly twice the entire steel production of Europe, which is demonstrating what kind of problem we have to face."

He said that although the Commission's decision on the market economy status for China under the WTO has not been made, he said that the EU will "stick to our international obligations" but that "this is a very difficult issue."

China steel industry
A barge carries steel cable from the Zhong Tian (Zenith) Steel Group Corporation on the Bejing-Hongzhou Canal Kevin Frayer/Getty Images

He said the Commission will hold an orientation debate on 20 July this year. It is finalising an impact assessment of the consequences entailed by the end of Article 15 of the WTO accession agreement with China. "And when this is done, we will check certain numbers of options and then we will make our decision, " he said.

By granting China market economy status under the terms of its accession to the WTO, 15 years ago, it would make it harder for major economies to bring anti-dumping cases against Beijing, reports the Financial Times.

Juncker admits adjustment will be painful for China

Jean Claude Juncker
European Commission President Jean-Claude Juncker at the European Parliament in Strasbourg Frederick Florin/ AFP

"I was explaining to our Chinese colleagues that we, as Europeans, are used to this painful adjustment process - in particular industrial sectors and mainly steel," Juncker said that in the second half of the 1970s and the first half of the 1980s, Europe had to go through that process due to overcapacity in steel production. The Davignon Plan was adopted which imposed production quotas on the European steel industry with minimum steel prices.

"We lost ten thousands of our jobs in my country, Luxembourg, of which I am no longer Prime Minister but I am talking about things I know best. We lost 80% of the jobs in the steel industry, so I know what this is about," Juncker said.

EU and China to set up working group to deal with steel overproduction

He also extended understanding of some of the problems China is facing, especially when it comes to reducing steel production and closing steel plants. Juncker also announced the setting up of a common working group that discuss the issue of steel overproduction.

"And we would like this platform, this working group to be dealing with verification and monitoring mechanisms. And we would like this group - or this platform - to have a look in depth into the possibilities which could exist in order to bring this problem to a good end."

A little too late for the UK?

The Guardian noted that it was ironic that EU's tough stance has come after the UK voted to leave the bloc. Leave campaigners had criticised the EU for failing to impose tariffs on Chinese steel exports and not doing enough to keep the industry.

An increase in cheap Chinese steel imported into the Europe has been primarily been blamed for the crisis facing the industry not just in the UK but also across the continent. In the UK, more than 11,000 jobs have been put at risk at Tata Steel. In the first quarter of this year, Chinese steel exports to the EU rose 28%, driving prices down by more than 30%.

In a separate debate in Westminster on 13 July, Business Minister Anna Soubry pledged that the UK government will do all it can to support the local steel industry. She said the government wanted to "maintain production of steel in south Wales, meaning at least one of the blast furnaces stays open" at Tata's Port Talbot plant.