AK Steel Holding Corporation : WTO Panel Rules China Duties on US Steel Violated Some Trade Rules
06/15/2012| 12:46pm US/Eastern
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--USTR Kirk says ruling "clear signal" China must abide by WTO rules
--Ruling to serve as precedent for challenging China duty cases
--US also looking at concerns over China auto and auto-parts policies
(Updates throughout with additional comments and details following conference call)
By Tom Barkley
WASHINGTON--A World Trade Organization panel has ruled that China violated some global trade rules by imposing duties on U.S. electrical steel, a key victory the Obama administration said would be used as a precedent for challenging other retaliatory measures from Beijing.
The panel decision, which can be appealed by either side, found that China initiated an investigation into unfair U.S. subsidies on electrical steel used in the power sector without sufficient evidence, and failed to disclose certain facts in determining whether the steel was being dumped in China.
The panel rejected some U.S. claims, including about how China calculated some of the duties, but agreed overall that countervailing and antidumping duty rates weren't supported by the facts. Countervailing duties retaliate against unfair subsidies, while antidumping duties can be imposed when goods are dumped, or sold below normal value.
"Today's victory is important not just for our steelworkers in Pennsylvania and Ohio, but for a range other interests as well, including American farmers and workers in other sectors that export to China," U.S. Trade Representative Ron Kirk told reporters on a conference call. "This decision sends another clear signal to China that it must do more to fulfill its WTO commitments."
The ruling provides some good news for President Barack Obama in those election battleground states, a day after he and Republican challenger Mitt Romney held dueling rallies on opposite sides of Ohio. The duties, which China imposed in April 2010, effectively cut off access for major U.S. producers of the steel by inflating prices, including Ohio-based AK Steel Holding Corp. (AKS) and Pennsylvania-based Allegheny Ludlum Corp., according to USTR.
The growing U.S. trade deficit with China has become a campaign issue, with Romney pledging in Cincinnati to declare Beijing a currency manipulator and slap tariffs on Chinese imports.
The increasingly competitive global steel market has been at the center of growing trade tension between the two countries. U.S. producers have lined up for relief from numerous types of imported Chinese steel, while China has reciprocated with its own trade remedies, including the duties on electrical steel. China's Commerce Ministry imposed antidumping duties of up to 65% and countervailing duties of up to 45% on imports on electrical steel imports from the U.S., which topped $200 million in 2008.
But Tim Reif, general counsel at USTR, said the ruling impact will be far broader, serving as a "precedent to China's abusive use of trade-remedy measures."
While the WTO allows countries to impose duties against imports that hurt domestic producers, the U.S. argued that China's duties violate several requirements by lacking sufficient evidence, disclosure or explanation regarding how it reached its decision.
Noting the pattern of China imposing duties on U.S. goods in seeming retaliation for U.S. tariffs, Reif said the steel duties seem to be part of a "disturbing trend" of China conducting its trade-remedy laws without regard to WTO rules.
Indeed, in the wake of a U.S. decision to impose duties on Chinese solar panels, China announced its own investigation last month of six clean-energy products in U.S. states that it accused of violating trade rules.
Reif said the U.S. is watching that case, while also looking into a variety of other concerns about Chinese trade practices--including involving the auto and auto-parts sector. A number of lawmakers have called for action against Chinese subsidies and import restrictions they claim have supported auto-parts production and exports in that country while causing job losses among U.S. producers.
Either country has 60 days to appeal the WTO's decision.
Officials at the Chinese embassy weren't immediately available to comment.
Write to Tom Barkley at tom.barkley@dowjones.com
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