NZ caught in global backlash against Chinese steel imports

The Chinese government wants New Zealand to maintain its reputation for "not being difficult" on trade issues, fearing that if Wellington imposes countervailing duties on Chinese steel imports, other countries will escalate the international backlash against its steel producers.

That is the dynamic that appears to be behind the unsourced reports published in weekend media of China 'heavying' New Zealand over key exports such as dairy, wool and kiwifruit if the New Zealand government decides Chinese steel is being dumped at damagingly low prices in the local market and imposes countervailing duties to protect local steelmakers New Zealand Steel and Pacific Steel.

Chinese producers are undercutting producers in other countries at a time of severe global over-supply, with the US seen by Beijing to be leading a global push for heavy countervailing duties on Chinese steel imports. The US imposed duties on Chinese steel imports of more than 500 percent earlier this year.

The issue was high on the agenda at a China-European Union summit meeting last week and last Friday China warned the Brazilian government against using "protectionist" measures to stifle Chinese steel imports by using the same criteria as the US to determine whether steel products are being dumped in Brazil.

New Zealand is one of only a few countries not currently penalising Chinese steel imports with punitive countervailing duties, but BusinessDesk inquiries confirmed today that the local units of Australian metals group Bluescope had sought an anti-dumping inquiry for Chinese steel from the Ministry of Business, Innovation and Employment some months ago.

The government agency has yet to decide whether to investigate.

The threats, which dairy exporter Fonterra Cooperative Group says it has "no knowledge of" were also initially denied by a former senior Ministry of Foreign Affairs and Trade negotiator, Charles Finny, who says he had been misreported in the Sunday Star-Times newspaper by appearing to give credence to the Chinese threats.

However, by early afternoon today, Finny said he had received a credible report from a highly placed diplomatic source that the Chinese government is concerned.

"It seems to be that New Zealand has a reputation for not being difficult for China on issues of this sort, unlike the US, who do this sort of thing at the drop of a hat," said Finny. "The concern is that if New Zealand were to find they were subsidising (their steel makers) then the whole world would feel comfortable in following suit."

However, other former trade negotiators continued to express doubts about the seriousness of the issue.

Speaking to Radio Live, New Zealand's former ambassador to the World Trade Organisation, Crawford Falconer, said that "a hurry-up, a threat, a comment" was "not unusual" in trade relations and it only mattered if it was a confirmed government position.

That was, as yet, unknown.

"If this was a considered thing from serious people then that's a pretty ugly event", but if it was the thoughts of a "mid-level Urg in the Agriculture Ministry, then don't panic", Falconer said.

Stephen Jacobi, now acting director of the New Zealand China Council and also a former trade negotiator, continued to maintain the issue was "a storm in a teacup".

"If there are issues, we need to see more real evidence," he said. "It's still all hearsay as far as I can see."

Trade Minister Todd McClay, travelling in Indonesia with Prime Minister John Key, has sought clarification from the Chinese embassy in Wellington, but his office said late this afternoon that he expected to make no further comment today.

(BusinessDesk)