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Steel Probe Clouds U.S.- China Relations

China and the United States have the means to iron out their trade disputes in the wake of the presidential election, according to China’s Foreign Ministry spokesman.

Lu Chang’s comments to reporters in Washington came several days after the U.S. Commerce Department announced that it would initiate a probe into allegations that China’s steel producers have been circumventing U.S. anti-dumping duties.

“As for some specific disputes in economy and trade, there are ready-to-use and mature frameworks and models to resolve them for China and the U.S. …” Chang said. “We believe that two major countries as mature as China and the U.S. are capable of handling these issues.”

President-elect Donald Trump has been crticized trade policies between the United States and China.

“Instruct the U.S. trade representative to bring trade cases against China, both in this country and at the (World Trade Organization),” reads one of Trump’s trade policy planks on his website. “China’s unfair subsidy behavior is prohibited by the terms of its entrance to the WTO.”

Another plank is even more emphatic.

“Use every lawful presidential power to remedy trade disputes if China does not stop its illegal activities, including theft of American trade secrets,” the policy statement says.

China has been circumventing anti-dumping duties by shipping steel products through Vietnam for minimal processing before they are routed to the United States, several U.S. steel companies – ArcelorMittal USA, Nucor Corp., AK Steel Holdings Corp. and United States Steel Corp. – said in documents received by the Commerce Department.

The Commerce Department reviewed the steel companies’ allegations prior to announcing on Nov. 4 that it would conduct inquiries to determine if the steel product diversions through Vietnam violated duties that are now imposed on steel products from China.

Such products are often used in construction and car manufacturing.

“The International Trade Commission found that there was injury to the domestic industry,” Commerce spokesman Tim Truman told AMI Newswire. The commission is a unit within the Commerce Department.

Such probes typically take about 300 days, Truman said.

“Dumping is defined by exporters and producers from foreign countries selling into the U.S. for less than they sell it in the home market,” he said.

China’s production of steel prodcuts was the topic of a Duke University study in September that found the country’s steel exports had ballooned to the point of creating a worldwide crisis.

“The global steel sector … predominantly fueled by China’s expansion since 2000, has grown to over 2,300 million metric tons (MT) while only needing 1,500 MT to meet global demand,” the report says. “The result is a global steel sector at unviable profit levels and an influx of cheap steel in the global trading system adversely affecting companies, workers and the global trading regime.”

Nearly 20,000 U.S. steelworkers have last their jobs in the last two years as a result of China’s predatory trade activities, according to the United Steelworkers union.

“Overcapacity is the biggest threat to the steel sector because it leads to low profit margins, subsequent plant closures and job losses, and increased friction in the global trading system,” the Duke University study says.

The Commerce Department agreed that the domestic steel companies’ complaint showed that the reprocessing of China’s steel products done in Vietnam was only 10 to 20 percent of the products’ total value. The diversion was allegedly done right after the United States announced in May that China’s steel imports would be subject to anti-dumping duties.

Vietnam’s tariff rate on steel products is less than what’s now imposed on steel products from China.

Labor unions and the steel industry view China’s trade actions as harmful to the American economy, but domestic automakers such as Ford and GM, as well as appliance makers and other steel-dependent companies, are able to lower the cost of consumer products when steel prices are low.

“Bilateral trade volume has skyrocketed from just $2 billion in the early 1970s to over $550 billion last year …” Chang said. “The past several decades have shown to us that trade between China and the U.S. only brings benefits and more jobs to the two peoples, not the opposite.”

China remains a key market for U.S. exports. Only Canada and Mexico purchase a greater volume of U.S. goods and services, according to the Commerce Department.