December 10, 2009 8:35 pm

Beijing imposes steel duties on Russia and US

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China imposed duties on Thursday on imports of certain speciality steel products from the US and Russia, in the latest sign of trade tensions between Beijing and its main trading partners.

The Chinese commerce ministry said the duties were a response to the dumping of products in the Chinese market by companies from the two countries. Beijing also alleged the US companies were receiving what were in effect subsidies as the result of “Buy American” legislation.

The ministry said it was the first time China had investigated the role of subsidies in lowering prices for imported goods, a riposte to the common claim that Beijing subsidises its companies. The case involves flat-rolled steel used in the electrical power industry.

Analysts said the duties affected only a small volume of trade, worth well below 1 per cent of the Chinese steel market. Coming at a time when China is under international pressure to let its currency appreciate, the new duties are the latest trade spat between China and the US. Tension began to escalate in September when the Obama administration imp­osed punitive tariffs on imports of China-made tyres. The US has also placed duties on Chinese steel pipes, while China has opened an inquiry into US imports of poultry, cars and auto parts.

The decision is a further sign that the steel industry is emerging as the most politically sensitive area of trade relations between China and its trading partners.

Last month the European Chamber of Commerce in China warned that there could be a spike in anti-dumping duties against Chinese products because a high level of overcapacity was leading to a surge in cheap exports. The European chamber said demand for steel in China was almost 30 per cent less than production capacity, creating an incentive to dump products on overseas markets.

As well as pushing back against criticisms of its trading practices, China has also so far resisted calls from the US, Europe and a growing number of developing economies to strengthen its currency. Zhu Min, a deputy governor of the Chinese central bank, said this week that during the financial crisis China had “good reason” to weaken the renminbi because exports were falling sharply. “But we took the same policy as we did in the Asian financial crisis, we decided to stabilise the exchange rate.”

But new figures to be released on Friday could raise pressure on Beijing to move on the currency. Economists say export figures for last month will start to rise again compared with the same month last year, while China could also move from deflation to inflation.

The Chinese commerce ministry said US steel companies had benefited from higher domestic prices because of the “Buy American” provisions in the US stimulus package. As a result, they were able to tolerate charging lower prices on exported goods, the ministry said. Imports of these speciality steel products had grown sharply in the past two years, while domestic production had slumped.

Additional reporting by Joe Cochrane in Jakarta

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