Global Policy Forum

By Clay Chandler

The Bush administration's effort to protect the U.S. steel industry touched off a fresh round of trade complaints and retaliation in Asia today as Beijing announced plans to impose new tariffs on imported steel, eliciting cries of protest from trade officials in Japan and South Korea.

Beijing plans to slap tariffs ranging from 7 percent to 26 percent on imports of nine types of steel products, according to a report published today in the state-run China Daily. A spokeswoman for China's ministry of foreign trade said the steel duties would take effect Friday and were intended as a retaliation against the Bush administration's decision in March to shield beleaguered U.S. producers with duties of up to 30 percent on imported steel.

Beijing also threatened to suspend tariff reductions promised under terms of China's admission to the World Trade Organization on a host of other U.S. imports, including soybean oil, electric compressors and paper products. Chinese trade officials put the cost to U.S. producers from those countervailing duties at $94 million through 2005. Chinese officials have also threatened retaliation against a farm bill signed by President Bush last week that would allow the U.S. government to aid U.S. farmers with subsidies of up to $130 billion.

China's move to curb steel imports follows a threat by the 15-nation European Union to impose $345 million in retaliatory tariffs on U.S. goods as early as June 18 and to impose a ceiling on all steel imports to head off what it feared would be a surge in shipments of steel manufactured in Japan, South Korea and Brazil and diverted to Europe from the U.S. market.

Japan last week also threatened to impose retaliatory duties worth an estimated $5 million on steel imports from the United States.

The Bush administration declined to comment on China's steel tariff plans, but trade officials in Japan and South Korea immediately decried China's decision to impose new steel duties. Officials from both nations charged that the measures would do most damage to steel producers in their countries.

Together, Japan and South Korea exported nearly 9 million tons of steel to China last year, for a combined value of $4 billion. In recent years, each country has posted double-digit growth in steel exports to China and has come to view China's burgeoning economy as its most promising foreign market.

Hideo Suzuki, a senior official in Japan's trade ministry, said China's announcement took Tokyo "by complete surprise." He deplored the action as "regrettable in the extreme." Suzuki said China's "unilateral" decision had "trampled" on efforts by Japanese negotiators to build a relationship of trust with Chinese counterparts during recent negotiations over low-cost Chinese agricultural exports.

A spokesman for South Korea's ministry of commerce said Seoul would coordinate with Tokyo to register their objections to Beijing's steel decision. Suzuki, the Japanese trade official, charged that in citing U.S. steel duties as a justification for trade-limiting measures of their own, Beijing had joined European governments in risking a "protectionist chain reaction" that would leave the whole world poorer.

Fred Hu, China economist for Goldman Sachs Group Inc. in Hong Kong, argued that in responding so stridently to U.S. steel duties, China's leaders were more concerned about sending a message to the Chinese people than to officials in Washington. China, he noted, is a net importer of steel and marginal player in the global steel market. "The concern here isn't about lost exports. It's more of a moral point. All the publicity about the U.S. steel tariffs has undercut the leadership's case for trade liberalization at home," Hu said. "They've been going around telling everyone that China has to accept sacrifices -- that China's state-owned enterprises have to restructure and learn to live with foreign competition. But now they're in an awkward position, where they feel they have to say, 'If the big boys can do this, we can do it, too.' "

In Beijing on Tuesday, Long Yongtu, China's vice minister for foreign trade, lashed out at U.S. farm subsidies during a seminar sponsored by Dow Jones & Co. If U.S. politicians help their farmers, "why can't we?" he demanded in an exchange with former U.S. trade representative Charlene Barshefsky.

Long, who led China's 13-year bid for WTO membership, deplored the U.S. farm bill as an "embarrassment" for Chinese leaders who had advocated open trade and vowed that Beijing would "do all we can within the regulations" of the Geneva-based trade body to offset U.S. agricultural subsidies with additional government support for Chinese farmers.

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