China loses WTO appeal in US speciality steel case

PUBLISHED : Friday, 19 October, 2012, 8:30am
UPDATED : Friday, 19 October, 2012, 10:41am

China lost an appeal against a World Trade Organisation ruling in a dispute over US exports of a speciality steel product that is primarily made in the presidential battleground states of Ohio and Pennsylvania.

The dispute involved duties imposed by China on “grain-oriented electrical steel”, which is used in the cores of high-efficiency transformers, electric motors and generators and is made by AK Steel Corp of Ohio and ATI Allegheny Ludlum of Pennsylvania.

China’s Ministry of Commerce had no immediate comment on the ruling, which arrived late in the evening in Beijing. The Obama administration said it was a victory for the United States, as well as for American workers and manufacturers.

The WTO’s decision comes ahead of the November 6 US presidential election and would give President Barack Obama another example to defend himself against accusations by his Republican opponent, Mitt Romney, that the Democratic administration has been soft on China.

“The Obama Administration will not stand by and allow China to break international trade rules,” US Trade Representative Ron Kirk said in a statement.

“Today we are again plainly stating that we will continue to take every step necessary to ensure that China plays by the rules and does not unfairly restrict exports of US products,” he said.

Obama has won WTO victories against Beijing in areas ranging from intellectual property rights to financial services to raw materials trade, and has launched several other challenges, such as a case against Chinese export restrictions on rare earth materials.

He has also created a new interagency trade enforcement unit to devote more resources to ensuring China and other countries abide by global trade rules.

The Romney campaign could not be immediately reached for comment.

The United States brought the case in September 2010 after China accused US exporters of “dumping” - or selling at unfairly low prices - on the Chinese market, and levied punitive duties on the imported steel products.

The tariffs, which AK Steel said amounted to about 19.5 per cent on its products, potentially affected hundreds of millions of dollars’ worth of the grain-oriented electrical steel.

China imposed the duties after state-owned steel firms Baosteel Group and Wuhan Iron and Steel Group complained about imports from the United States and Russia, which was not a WTO member at the time and was not involved in the case.

The Chinese steel giants were unhappy about the “Buy America” provisions of the American Recovery and Reinvestment Act of 2009 and state government procurement laws.

The WTO appeals judges upheld the original ruling published in June and disagreed with China’s claims that the three-person panel of adjudicators who judged the case then had misinterpreted the WTO rules.

“This is very good news for American producers of this product,” said David Hartquist, a partner with Kelley Drye law firm who represents ATI.

However, Hartquist said there was still a “long road ahead” as the case had to go through the WTO’s dispute settlement body and China had to comply with the ruling.

Calls to AK Steel’s lawyer were not immediately returned.

The decision of the original panel, which was chaired by New Zealand WTO Ambassador John Adank, received one of the most ringing endorsements by the Appellate Body in recent years.