Trade rows brew as China helps home team tackle slowdown
Beijing/Geneva, Dec 11
China is sowing the seeds of a global trade war as its smelters, refiners and manufacturers increasingly export goods they can’t sell into a slowing domestic economy, prompting accusations of dumping and unfair subsidies from its trading partners.
With China’s exporters already gaining a competitive edge from its weakening currency, global metals producers are crying foul over Beijing’s plans to cut export taxes, and the United States is complaining that a raft of government subsidy programmes disadvantage rival producers.
Beijing hopes to gain market economy status under World Trade Organisation (WTO) rules a year from now, which would force trading partners to use China’s domestic prices instead of a third party’s to assess if it is exporting below market value, and it has warned that it will fight back if countries continue to resort to anti-dumping duties.
Chin Leng Lim, a trade expert and professor of law at the University of Hong Kong, said a combination of factors could stoke trade tensions to a pitch not seen since the global financial crisis.
“You’ve got a slowing economy in China, a huge push on exports, a pushback on the part of producers in the US and an election looming, while there is a question hanging around some of the rules of the game. It’s going to be exciting,” Lim said.
Growth in the world’s second-largest economy has slowed to a 25-year low, hitting demand for industrial raw materials like steel and copper, so domestic producers are looking to sell their surplus on a saturated global market.
“We don’t make any big profit by exports, but we don’t have other alternatives,” said a senior exporter with a small steel mill in Hebei province.
And Beijing appears to be helping the home team. The government said on Wednesday it would cut export taxes for some forms of steel and chemicals next year.
“It is worrisome to see the Chinese government continue policies that are essentially aimed at exporting their over-production into the world market,” said Jeff Henderson, director of Operations at the US Aluminum Extruders Council.
China’s Commerce Ministry did not respond to a request for comment, but Shi Zihai, spokesman for the state planning agency, denied unfair government influence. “China has integrated into the global market. We are engaging in fair trade,” he said.
China’s trade partners have already responded with about 330 protectionist policies in the past 12 months, according to Global Trade Alert, a website run by Simon Evenett, a professor at the University of St Gallen.
The US in particular, which in the past 12 months has seen import prices from China fall at their fastest rate in five years, has launched a barrage of anti-dumping and anti-subsidy challenges, arguing Beijing is trying to build up industries it sees as its new growth drivers.
The US Commerce Department on Wednesday hiked discounted anti-subsidy rates on aluminium extrusion imports from 38 Chinese companies and on Tuesday launched a WTO challenge to China’s exemptions on value-added tax for locally produced aircraft.