China blasts US duties ahead of Obama visit

(Agencies)
Updated: 2009-11-06 17:11

BEIJING: China denounced as protectionist new US anti-dumping duties on steel pipes on Friday and called for Washington's swift recognition that it is a market economy, a week before a visit by US President Barack Obama.

The United States on Thursday slapped preliminary anti-dumping duties ranging up to 99 percent on $2.63 billion in Chinese-made pipes used in the oil and gas industry, in the biggest US trade action against China to date.

The Commerce Department issued its preliminary decision a week before Obama heads to Asia on a trip that includes stops in Shanghai and Beijing. It follows counter-vailing duties on the same product, announced in September.

"China resolutely opposes the abuse of protectionist measures, and will take measures to protect the interests of our domestic industry," the Ministry said on its website on Friday.

"We hope that the US will set aside its biases and as quickly as possible recognise China's market economic status, thoroughly overcoming its double standards and giving equal and fair treatment to Chinese firms."

In trade meetings with US officials last week in Hangzhou, the Chinese side pressed for recognition as a market economy, before the 2016 deadline negotiated when it entered the World Trade Organisation. That would make it harder for the United States in future to rule in favour of such duties.

Washington promised to set up a panel to consider the issue.

"The US should give objective consideration to the fact that the fundamental problem of the concerned US industries is the fall in consumption demand brought on by the financial crisis, and thereby make a just, fair and reasonable final determination" on the steel pipe duties, the ministry said.

China may tread softly on this case to help achieve its greater goal in talks with the Obama administration, said Wang Yong, a professor at Peking University who specialises in China-US economic ties.

"Within the bounds of its laws, China may also examine anti-dumping measures against certain US products ... But China does not want bickering to spoil the visit. That's a priority."

"Obama may, say, announce progress on recognising China as a market economy during the visit. So before that he needs to show people at home that China must play by the rules," said Wang.

Markets and market economies

As long as China has no recognition as a market economy, trade partners can compare its products to those of other nations with different cost structures for labour or transport, when assessing whether products have been dumped.

Export-dependent Chinese industries are dominated by private firms, which cut margins to the bone by competing with each other at home and for export markets. Entrepreneurs pile into any promising industry, creating overcapacity that destroys profits.

Pipes that can carry highly corrosive oil and natural gas presented a new opportunity for Chinese steel processors moving up the value chain. Exports to the United States, their biggest market, tripled to $2.63 billion in 2008 compared with 2007.

"These duties have a big effect, and we no longer export to the US. The measure has been threatened for a while, and clients don't dare order from Chinese producers any more," said Zhang Kemin, a trader with Changzhou Darun, now targeting the Ukrainian market.

Similar trade disputes have piled up as the global economic crisis increased competition with American manufacturers.

China is particularly upset over first US use of safeguard duties, against tyres, because safeguard duties only have to show a surge in exports, without proving dumping or subsidies.

"This has set a very bad example. China must keep cool-headed and make long-term preparations," Wei Jianguo, a former Vice Minister of Commerce, wrote of the safeguard duties in Southern Breeze, a Chinese current affairs magazine.

"China must be decisive and not at all polite."

The US International Trade Commission votes on Friday on whether to approve three more probes covering coated paper, certain standard steel fasteners and sodium and potassium phosphate salts from China.

"At the moment, most of our firms who export are private firms. They get really hurt by any obstacles to exports," said Yang Junfeng, who runs an information portal for fastener producers. He said the threat of duties against Chinese mainland fasteners had benefited Taiwan's exporters over their mainland rivals.

China on Thursday said it would study policies in the states of Arkansas, Alabama and Texas as part of its anti-subsidy investigation into chicken parts imported from the United States.