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Beijing has long been accused of dumping excess products. Photo: Reuters

China risks escalating trade row with US and EU after it cuts export taxes on steel

Latest move flies in face of complaints by Washington and Brussels about dumping

China will scrap export duties on some steel products in the new year, the country’s finance ministry said in a statement on Friday, a move that is likely to worsen Beijing’s trade disputes with the United States and the European Union.

Both the Americans and Europeans have accused China of dumping excess steel products on their markets and the US recently slapped tariffs of up to 265 per cent on steel imports from Vietnam that were sourced from Chinese materials.

This week at the ministerial meeting of the World Trade Organisation, the US, EU and Japan signed a joint statement to pressure China to address overcapacity and forced technology transfer.

According to the World Steel Association, China is the world’s largest steelmaker, producing 808.4 million tonnes last year, followed by Japan with 104.8 million tonnes.

China imposes export taxes on some steel products, generally ranging from 5 to 10 per cent, and

Chinese officials have often cited those duties to support the argument that the government is not deliberately encouraging steel exports.

Over the past 11 months, China’s net exports of steel products have fallen by 35 per cent annually to 57.7 million tonnes, according to data from China’s General Administration of Customs.

Earlier this year, the China Iron and Steel Association, an industry lobby group, urged the government to adjust export duties on some products, warning that imports were hurting domestic producers.

It came after China was the subject of a total of 119 trade remedy investigations involving alleged cases of dumping last year. Half the cases in question, which covered 27 countries and regions, involved steel exports with a total value of US$7.9 billion, according to the finance ministry.

Mauro Petriccione, a senior EU official handling the group’s trade and investment relations with Greater China, said in Hong Kong on Friday that China had not changed its policies to promote trade and investment liberalisation despite a pledge by Chinese President Xi Jinping at the World Economic Forum in January.

In his speech in Davos, Xi warned against protectionism and committed himself to global free trade.

But Petriccione said: “We are still waiting to see whether China transforms itself in a way that makes it a comfortable trading partner for us to do free trade with.”

The steel export duty cuts formed part of the finance ministry’s tax adjustments for 2018. It also scrapped export taxes on some fertilisers and import duties on steel slag products.

The ministry also said it would cut import tariffs on IT products for the third time in July next year.

In late November, Beijing announced a new round of import tariff cuts on 187 goods – ranging from baby milk formula to cheese – to propel consumer spending.

This article appeared in the South China Morning Post print edition as: Scrapping of steel export taxes likely to anger US, EU
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