BEIJING EFFECT
Steel industry’s countervailing claims go against Chinese ambassador’s assurances
THE NUMBER of countervailing claims against China because of steel exports went against this week’s assurances by the Chinese Ambassador to South Africa Tian Xuejun that China did not support its steel exports, according to international trade consultant Donald MacKay.
Xuejun this week defended the Chinese steel sector, saying its competitiveness stemmed from favourable labour costs, scale, technology and supply chains. He denied that the Chinese government subsidised its steel producers.
Tariffs
“As a member of the World Trade Organisation (WTO), China always abides by world trade rules. Not only has it never subsidised steel exports, it has even imposed tariffs on the exports of certain kinds of steel products, an action never taken by other steel producing countries,” Xuejun said.
But South Africa’s biggest steel producer ArcelorMittal has partly blamed subsidised Chinese steel imports for its woes. The company this week said steel imports constituted 25 percent of South African steel consumption, up from 10 percent five years ago.
“This surge in cheap foreign imports mainly from China, where local steel is statesubsidised, constituted 56 percent of all South African imports in 2015,” the company said.
MacKay, a director at XA International Trade Advisors, said yesterday that the South African government was not keen to take countervailing action against China.
But he said South Africa had to revise its stance.
In terms of WTO rules, countries can impose countervailing duties in order to neutralise the negative effects of subsidies after investigating whether a foreign country subsidising its exports would hurt domestic producers in the importing country.
In his comments in XA’s 2016 Tradespot publication, MacKay said: “I am not sure if this will happen in the next year, but South Africa is going to have to revise its position on refusing to bring countervailing actions against China.
“Coupled with the 2006 Record of Understanding signed with China, it makes taking meaningful action against China very difficult. As the Chinese economy stutters and struggles, its currency depreciates.“
In the report, XA said the Chinese government was still heavily subsidising certain sectors resulting in ever increasing global overcapacity in a number of sectors, driving prices ever lower.
“This capacity would never be installed without intervention by the Chinese government, driving a huge increase in the number of countervailing and antidumping actions against China. South Africa is conspicuously absent from these actions.
“I believe pressure will be brought to bear to put these actions back on the table in order to compensate for the state intervention in a number of primary industries,” it said.
Protection
Metal products dominated the countervailing investigations initiated by the Group of 20 economies between January and June last year. XA said metal products had become a significant target for protection through the antidumping instrument because of the global overcapacity in the steel industry and declining prices.
“South Africa’s steel industry has not been spared in this regard. The domestic steel industry is reeling from increasing imports of various steel products particularly from China. Several antidumping investigations targeting Chinese steel imports in particular are expected in 2016.
“It is likely that metal products will remain a significant target for antidumping until the global steel industry recovers and some level of stability is reached,” it said.
The global economic slowdown, and the slowdown in the Chinese economy in particular, has led to excess stock and over capacity in the global steel industry. Global producers have to find markets for excess stock.
“With no duties, South Africa became an attractive market particularly for Chinese producers. In our case, the protection seems to be coming after some significant damage has already been done,” the publication said.
‘As a member of the World Trade Organisation China always abides by world trade rules.’