China-US relations

China to stand trade ground as US turns tough talk into action

Washington’s anti-dumping investigation into Chinese sheet aluminium could be the start of tenser times to come, analysts say

PUBLISHED : Wednesday, 29 November, 2017, 9:42pm
UPDATED : Wednesday, 29 November, 2017, 11:27pm

Washington is shifting up a gear in its trade crusade against Beijing, moving from tough rhetoric to action by launching an anti-dumping investigation into imports of Chinese sheet aluminium.

Analysts warned the move was a signal that trade confrontations would increase as US President Donald Trump began to put his words into action.

In a rare move, the US Department of Commerce announced on Wednesday that it was initiating countervailing duty and anti-dumping probes on its own – and not in response to an industry complaint – into Chinese aluminium alloy sheet imports.

It’s the first “self-initiated” probe by Washington since 1991.

“President [Donald] Trump made it clear from day one that unfair trade practices will not be tolerated under this administration,” US Secretary of Commerce Wilbur Ross said. “We are self-initiating the first trade case in over a quarter century, showing once again that we stand in constant vigilance in support of free, fair, and reciprocal trade.”

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China’s Ministry of Commerce said the move would damage the trade in aluminium products between China and the United States, and hurt both nations’ economic interests.

The ministry said it would take “necessary action” to protect the legitimate interests of Chinese companies.

The department has had the power to launch such investigations since 1980 but has rarely exercised the authority. The last time it initiated a countervailing duty probe was in 1991 into imports of Canadian softwood timber. The last self-initiated anti-dumping probe was in 1985 into Japanese semiconductors.

US imports of Chinese aluminium alloy sheet are small business – roughly just US$600 million last year – but analysts said the decision to go ahead with the investigations pointed to tougher trade confrontations down the track.

“It indicates that the US government is rushing to stand on the front line to protect its steel and non-ferrous metal industries,” He Weiwen, a former business adviser at the Chinese consulate in New York, said.

Sun Lei, a Beijing-based lawyer with global law firm Dentons, said the investigations showed Trump was following through on pledges made on the presidential campaign trail.

In the run-up to the US presidential election last year, Trump vowed to launch a trade war to tackle the US’ trade deficit with China.

“It is a clear political declaration of the US’ trade protectionism,” Sun said.

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Huo Jianguo, a former research head with China’s Ministry of Commerce, said China should prepare for a long road ahead because the US would not reduce its pressure on China on trade issues.

“Chinese companies and authorities should work together … to reduce the risk of trade investigations, but more importantly, both countries should put trade on the agenda of top-level talks,” Huo said.

At the heart of the dispute are long-running differences between China and its major trading partners over how to measure the value of exported goods in trade probes.

In a complaint to the World Trade Organisation in December, China argued against the use of “analogue pricing” standards used by the US and the European Union to determine anti-dumping duties on Chinese goods.

When China joined the WTO it was not classed as a market economy, so the international trade body calculated whether Chinese goods were being sold below cost based on the cost of similar goods in another country that did meet the market economy criteria.

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In general, this system shows Chinese goods being sold at well below what they would cost to make in other countries.

Those accession terms expired on December 11 but the US continues to apply them. In its aluminium investigations, South Africa’s production costs will set the standard.

The EU revised its trade rules but reserved the right to use the analogue system and to impose punitive high tariffs on Chinese products.

Sun said the analogue pricing practice had resulted in great losses for Chinese companies and other countries could follow the US and EU’s lead.