Far From a Truce

By Deng Yaqing

Trade disputes between China and the West continue to grow as each side views the other with mounting skepticism

There is no shortage of trade wars between China and the developed world.A dispute broke out again on May 10 when China’s Ministry of Commerce (MOFCOM)announced an anti-dumping investigation into some steel tube imports—or in scientific terms, alloy-steel seamless tubes and pipes for use in high temperature and pressure environments—from the EU, the United States and Japan.

China has become the largest market for alloy-steel seamless tubes and pipes,due to rapid economic expansion and a strong demand for thermal power. Such steel tubes and pipes are widely employed in advanced thermal power generating units. Since most developed countries have a saturated thermal power market, China is the most appealing for manufacturers—over 90 percent of the world output goes to China each year.

Some think MOFCOM’s investigation is a show of retaliation, because China has been one of the top targets of dumping allegations for much of the past two decades.

China hits back

For many years, companies in developed countries, including the U.S.-based Wyman-Gordon Forgings Inc., the EU-based vallourec & Mannesmann Tubes and Japan’s Sumitomo Metal Mining Co.Ltd., have monopolized the production equipment and technology of alloy-steel seamless tubes. According to the MOFCOM,tubes from the United States, Europe and Japan made up over 94 percent of all such products in the Chinese market from 2009 to 2012.

It was not until 2009 that the Inner Mongolia North Heavy Industries Group successfully produced the first ferrous metal extrusion press with a production capacity of 36,000 tons. Despite being one of the few countries that can manufacture such tubes, dramatic price cuts by foreign rivals have driven domestic manufacturers to the wall.

But the cost of importing the products under investigation declined a remarkable 47.26 percent from 2009 to 2012,according to an anti-dumping application submitted by the Inner Mongolia North Heavy Industries Group.

PIPING IT IN: A worker transports imported stainless steel pipes for a Jiangsu-based company on May 23, 2012

China’s concerns go beyond tubes.According to a report from the Economic Information Daily, the MOFCOM is planning to launch an anti-dumping probe into imported grape wine, as retaliation to the frequent investigations initiated by the EU.The China Alcoholic Drinks Association says roughly one third of grape wine in China is imported from other countries, the EU in particular. Some insiders say that because some EU nations receive government subsidies, the CIF (cost, insurance and freight) of grape wine from the EU could be as low as 1 euro.

Wang Dehui, an expert on grape wine and General Manager of ZHIDE, a professional wine-marketing strategy company based in Shenzhen, south China’s Guangdong Province, argued that domestic producers will not be fundamentally revitalized by possible anti-dumping measures because Chinese consumers prefer imported wines.

Massive attack

As early as in October 2009, the U.S.Department of Commerce slapped antidumping duties ranging from 32.39 percent to 98.37 percent on imports of seamless pipes from China, claiming that Chinese producers had sold seamless pipes in the United States at a cost of up to 98 percent lower than that of local producers.

Coinciding with the announcement of the investigation into alleged dumping of alloy-steel tubes by EU members, the EU’s executive arm is now considering a heavy 47-percent tariff on Chinese solar panels, which is expected to take effect on June 6.

Accompanied by the U.S. Department of Commerce’s decision to set anti-dumping duties ranging from 18.32 percent to 249.96 percent on solar-energy cells imported from China in May 2012, the case was first proposed by EU Pro Sun, a joint initiative of members of the EU solar industry, who claimed in its complaint lodged on July 25,2012 that solar panels and their key components imported from China enter the European market at prices below market value.

“EU member nations should oppose proposed anti-dumping duties on Chinese solar panels that may hinder free trade and market growth, the UK’s Solar Trade Association said in a recent statement.

The provisional tariffs will increase the cost of photovoltaic (Pv) panels imported from China and other countries.

“These duties, if imposed, will damage the UK’s solar market, particularly the large-scale ground-mount sector,” Paul Barwell, CEO of the association, said on May 8. “This is the perfect opportunity to demonstrate the UK’s commitment to both free trade and the environment by urging other member states to vote ‘no’ to these duties.”

“The duties will actually result in a net reduction in EU solar jobs, restrict the growth of the solar market, and damage Europe’s chances of meeting its 2020 renewable targets,” Barwell said, urging the British Government to vote against them.

Harm to trade

The Chinese Government called for the European side to be cautious in using protectionist measures.

“China and the EU are each other’s most important trade partners,” said Hua Chunying, spokeswoman for China’s Ministry of Foreign Affairs, at a recent routine press conference. “We hope that both sides can maintain an attitude of constructive cooperation, and use dialogue and consultations to properly handle differences.”

“Every year, roughly 70 percent of the solar panels and key components made in China go to the EU market,” said Miao Liansheng, CEO of Yingli Green Energy, a major solar energy company and Pv manufacturer based in Baoding,north China’s Hebei Province. “With the 10-percent market share loss from the United States,what we are confronting now is whether China’s Pv industry can survive.”

“Now, China is playing an increasingly important role in the EU’s exports. To ride out of the current debt crisis, the EU has to depend on exports,” said Zhang Jian with the China Institutes of Contemporary International Relations.

“The EU should spare no efforts to safeguard China-EU trade relationship, rather than resorting to protectionism. While China’s economy may suffer because of these antidumping measures, the EU could suffer more,”said Zhang.

On May 17, the EU’s top officials lodged a charge against Huawei Technologies and ZTE,China’s two leading telecom equipment providers, for alleged dumping behavior and illegal government subsidies.

“Since the outbreak of the global financial crisis, trade protectionism has been on the rise, and it has spread to China’s highend products,” said Huo Jianguo, President of the Chinese Academy of International Trade and Economic Cooperation. “For one thing, it’s the result of the rapid development of the telecommunications industry; for another, it reminds us that Chinese enterprises should improve their adaptability.” ■