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In China, U.S. Steel Move Is Seen as Self-Destructive

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04/21/2017 | 01:14pm CEST
By Chuin-Wei Yap 

As the White House threatened new U.S. barriers to steel imports, officials and experts from the world's biggest steel-exporting nation, China, said the real loser might be America itself.

The U.S., these people say, has high steel costs because rising American tariffs have failed to stem an erosion of domestic competitiveness, and not directly due to a flood of Chinese exports.

"Why would one or two million metric tons of Chinese exports matter that much to a country that imports 100 million tons a year?" said Chi Jingdong, deputy secretary-general of the state-backed China Iron and Steel Association. "What they're doing is not reasonable."

American President Donald Trump is taking a stand on steel for a difference reason. He ordered a probe on Thursday into whether steel shipments to the U.S. constitute a threat to national security due to its military and civilian uses, invoking a rarely used statute.

The scope of the probe is unclear, but broad sanctions on steel imports could hurt the U.S. economy's competitiveness by raising costs for manufacturers of goods ranging from oil pipes to factory equipment to cars, these people say.

They also would complicate Mr. Trump's campaign vows to accelerate infrastructure building, said Tomas Gutierrez, a Shanghai-based analyst for the steel consultancy Kallanish Commodities.

China on Friday said it was premature to comment. "First, we need to see the details of that investigation to see the target of this investigation," a Foreign Ministry spokesman said.

In South Korea, the world's sixth largest steel producer, the government said it was wary of rising U.S. protectionist threats while closely studying them and their impact on the economy before considering any action.

"South Korean businesses have growing concern about increasing import restrictions on steel recently. We're scrutinizing them case by case," Yeo Han-koo, director general of the trade ministry's Trade Policy Bureau, said in an interview.

Vice Trade Minister Woo Tae-hee, who is now visiting the U.S., plans to deliver Seoul's concern to the Trump administration about an American decision in April to impose tougher punitive duties on some Korean steel producers, the ministry said.

Seoul also plans to raise an issue with the "irrational" U.S. import restrictions when a World Trade Organization panel meets on state subsidies and anti-dumping in Geneva next week, the ministry said.

South Korean Trade Minister Joo Hyung-hwan himself plans to meet with local steel companies next week to discuss countermeasures to take against any U.S. import restrictions. "The government is open to all possible options," the ministry said.

In Japan, the second-biggest steel producer, chief government spokesman Yoshihide Suga said the probe's impact was still unclear but "the Japanese government would naturally like to closely watch the impact it would give to Japan-U.S. relations and Japanese companies."

Experts say that any U.S. protectionist move isn't likely to hurt China much despite its outsize role in the global steel industry, producing half the world's steel.

The U.S. imported less than one million of the 110 million tons of steel products that China produced last year , according to U.S. data. Under pressure from global industry, Chinese steel exports have declin ed in recent months, down 28% in March this year from the same month a year earlier.

China has acknowledged its steel industry has built too much capacity, though its officials often reject accusations that the factories weigh on global markets. Beijing has set a goal to cut 14% of this capacity by 2020 and says the reductions are coming in ahead of schedule.

Over the last decade, the U.S. steel industry has steadily built a range of tariffs on Chinese products from oil pipes to rolled coil--a period corresponding with ever higher U.S. steel prices versus Europe and Asia. Analysts say the tariffs are now so numerous that there are relatively few other steel products left to tax.

"I find it hard to believe their claims that imports are undermining prices unfairly when U.S. prices are higher than most major markets," Mr. Gutierrez said.

The Trump administration is studying the use of Trade Expansion Act of 1962 to achieve its aims. The U.S. has used it on only a handful of times for major purposes, including oil embargoes on Iran in 1979 and Libya in 1982. The WTO's creation in 1995 further sidelined the statute; the global body discourages unilateral sanctions, in part, analysts say, because the "national security" provision lends itself to opaque decision-making.

"It's like using the 'state-secrets' argument in China--you can justify anything with it," said an analyst with a major Western commodity trading house.

Chieko Tsuneoka in Tokyo and Sofia McFarland in Beijing contributed to this article.

Write to Chuin-Wei Yap at [email protected]

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