x Abu Dhabi, UAEWednesday 26 July 2017

Steel grating underlies China's latest trade row

Used largely for walkways, platforms or flooring in factories, steel grating may not at first glance seem the kind of product capable of generating high drama in global trade.

A labourer welds steel frames at a construction site in Changzhi, Shanxi province.
A labourer welds steel frames at a construction site in Changzhi, Shanxi province.
Used largely for walkways, platforms or flooring in factories, steel grating may not at first glance seem the kind of product capable of generating high drama in global trade. However, this week's decision by the US commerce department to set preliminary anti-dumping duties of up to 145 per cent on steel grating imported from China, to offset what it sees as unfairly low prices, could have major repercussions in broader trade terms.
The US imported about US$91 million (Dh334.2m) worth of the product from China last year, a relatively small amount, but it is emblematic of growing trade tensions with China. Washington said the grating was being sold at below-market value to gain an unfair trade advantage and accused the Chinese of so-called dumping, as it had done with other steel products. Similar tensions exist with the 27-member EU, which is China's biggest trading partner.
Both Barack Obama, the US president, and the European Commission president Jose Manuel Barroso have visited the Beijing leadership in China this year. The meetings were rendered difficult because in both cases the Asian dragon has rebuffed calls to allow its currency to rise. The Europeans and the Americans complain that China is manipulating its currency to gain an unfair trade advantage. The Chinese response has been that calls on Beijing to push up the yuan's exchange rate are unfair, especially in the context of what they describe as "brazen" protectionist measures by the West.
In the Chinese city of Nanjing for an EU-China summit last month, a clearly irritated Mr Barroso cancelled a press conference as tempers frayed over trade issues. After all, about 20 per cent of China's exports go to Europe and the EU runs a large trade deficit. In one commentary carried on the official Xinhua news agency, the US-China trade relationship was described as being like a clumsy couple dancing, close but always treading on each other's toes.
"Currently, trade and economy have apparently become the ballast and major impetus in their relations," Wang Yong, the director of the Centre of International Political Economy at Peking University, wrote in the commentary. After Mr Obama met his Chinese counterpart Hu Jintao, the upbeat wording of the communique, in which they said they were "committed to building a positive, co-operative and comprehensive China-US relationship for the 21st century", belied the stilted nature of their talk and the trade tensions boiling below.
The world has good reason to be wary of offending China, whose strength as a trading nation is growing rapidly. The Hong Kong Economic Times reported this week that China has this year replaced Germany as the world's largest exporter and Japan as the world's second-largest economy. China's full-year exports fell 16.5 per cent from last year, but the pace of decline is slower than in other big exporting nations. A glance at the figures shows China has a bigger slice of the global pie, now reckoned at 9 per cent of the world's total, up slightly from 8.86 per cent last year. This year the country also replaced the US as the world's biggest car market.
Earlier this month, the annual report of the office of the US trade representative highlighted how China had imposed more trade restrictions this year, particularly in the areas of intellectual property rights, industrial policies, trading rights and distribution services as well as agriculture. The report said how "in some areas it appears that China has yet to fully implement important commitments, and in other areas, significant questions have arisen regarding China's adherence to ongoing World Trade Organisation (WTO) obligations".
China joined the WTO in 2001, a hard-fought move that opened up scores of new markets but also required it to cut tariffs and remove barriers to free trade. While progress has been made, the US regularly complains that China is not doing enough to boost market access for goods and services from other countries and to stop rampant piracy and other breaches of intellectual property rights. Between 2001 and last year, US exports of goods to China jumped 270 per cent to $70 billion, making China the US's third-largest goods market.
While tensions with the wider world continue to simmer, China is also looking closer to home when it comes to matters of trade. Together with the Association of South East Asian Nations (ASEAN) it will establish the world's biggest free trade area (FTA) tomorrow, freeing up billions of dollars worth of trade in a market of 1.7 billion consumers. The ASEAN-China FTA will be worth as much as the EU and the North American Free Trade Agreement in terms of value, and has a greater population than those markets.
Intraregional trade has been growing at 20 per cent a year and the FTA will mean average tariffs imposed on Chinese goods by the 10 ASEAN states will fall to 0.6 per cent from 12.8 per cent. As for the dispute with the US, the commerce department said it would make its final decision on steel grating next April. "If commerce makes an affirmative final determination, and the US international trade commission makes an affirmative final determination that imports of steel grating from China materially injure or threaten material injury to the domestic industry, commerce will issue an anti-dumping duty order," it said.
At that point, steel grating will truly be one of the more controversial products in the world.
business@thenational.ae