China protests against U.S. steel pipes tariffs

By Lucy Hornby and Chris Buckley

BEIJING (Reuters) - China's Ministry of Commerce on Thursday said a U.S. decision to impose preliminary duties on imports of Chinese-made steel pipes broke global trade rules, as it lobbies against an impending decision on tire shipments.

The case is one of the biggest to move through the U.S. trade litigation system in recent years as President Barack Obama faces a September 17 deadline to decide whether to curb tire imports from China. That will indicate the administration's stance on applying "safeguard measures" that China agreed to when it joined the WTO.

The $2.6 billion steel pipe case, and others that are pending, could push Beijing to become increasingly active in the World Trade Organization, which it has found to be a useful tool in keeping markets open to the exports that drive its economy.

"China expresses strong dissatisfaction and is resolutely opposed to this," the ministry said.

"This does not comply with WTO agreements on subsidies. The U.S. used an incorrect method to define and calculate the subsidies, which has resulted in an artificially high subsidy rate, hurting Chinese firms' interests."

China has lobbied heavily in Washington against the tire tariffs, which, if imposed, would open the door to a slew of other complaints that Chinese products have harmed U.S. industry.

"China is the number one target of these duties and anti-dumping measures and the primary reason is that China is very competitive," said Edwin Vermulst, a trade lawyer with Vermulst Verhaeghe Graafsma & Bronkers, and adviser to the Chinese government on a different dispute.

"China will continue to resort to the WTO because if they don't, other countries will feel like they have carte blanche."

China has filed only five complaints to the WTO -- compared to 16 in which it was the respondent -- but three of the five have occurred in the past 11 months.

FIGHTING OTHER CASES

Trade officials are rolling up their sleeves to fight other cases, including existing European tariffs against Chinese footwear and threatened U.S. action against magnesia carbon brick, in addition to the U.S. pipe and tire cases.

"The U.S. should stick to its promise not to carry out any new trade protection measures before the end of 2010 and desist from any trade relief measures, and abide by the G20 consensus reached in London," the Ministry of Commerce said.

Although Chinese exports of steel pipe used to transport oil had soared over the past two years, peaking at 376,000 tonnes in November 2008, they have since fallen dramatically.

The U.S. imported 77 tonnes in July.

One possible line of defense for China, if it does take the steel pipes case to the WTO, would be to argue that countervailing duties, which depend on showing harm from a surge in imports, cannot apply when the volume of shipments is falling.

Jitters over the pending case contributed to the drop in Chinese pipe shipments to the United States, Chinese firms said.

"It's not just economic conditions. The anti-dumping case has meant many customers are reluctant to sign orders," said Zhou Jianyang, a sales manager at Zhejiang Jianli Group, one of the Chinese companies hit by the U.S. measures.

"In the Middle East and other major markets, our orders have also slowed because of the economy and lower oil prices, but nothing like the United States."

The company was considering an appeal, he said.

"With this anti-dumping case, many customers have been unwilling to buy from Chinese companies because they didn't know what the decision will be," said a sales manager at Jiangsu Changbao Steeltube Ltd, another firm targeted by the duties.

The U.S. decision was taken two weeks before a G20 meeting in Pittsburgh, home to U.S. Steel, one of the complainants in the steel pipe case. Leaders there will set the tone for the Doha round of talks to tackle agricultural subsidies and tariffs.

News Courtesy By reuters.com