- Reuters
- , Tuesday October 28 2008
BEIJING, Oct 28 (Reuters) - Moves by China to restrict steel exports may push trade distortion problems into other industries down the line and run counter to world rules, a U.S. trade official said on Tuesday.
After meeting U.S. officials last week for a regular steel dialogue, China said it was trying to promote fair trade in the industry and had even tried to rein in its surging exports of the metal.
Tim Stratford, assistant U.S. trade representative for China, said Beijing risked missing the point of Washington's concerns.
"Some types of export restrictions could run afoul of some of the WTO (World Trade Organisation) principles and WTO obligations of China," he told a press briefing in Beijing.
"We need to find a path forward so that market principles can govern steel production in China because administrative measures will only create their own problem."
U.S. steel producers blame Chinese government subsidies and unfair trade practices for a more than doubling of Chinese steel production between 2004 and 2007 to 489 million metric tonnes, or about five times U.S. steel output.
China has removed most of the rebates it used to grant steel exports and in some cases has imposed a tax on exports, to further its own goals of preventing breakneck expansion, overcapacity and destructive competition in the steel industry.
Stratford said blocks on exports could lead to a build-up of steel in China and, consequently, a much lower price for the metal there than elsewhere in the world.
"If the domestic prices of steel in China drop below the world price, downstream industries that use a lot of steel have to move their production to China in order to be competitive," he said.
Steel firms are beginning to feel the economic effects of the financial crisis rocking the world. The World Steel Association said earlier this month that the uncertain outlook meant it would not give its usual market forecast.
In China, industry insiders have said steel makers are facing a cost crisis because falling demand for the metal has driven its price below the cost of raw materials. Chinese steelmills are now lobbying for a restoration of some export rebates.
Stratford said the dialogue had been helpful to both countries in illuminating their points of view and, hopefully, avoiding formal disputes at the world trade body.
"If we have to and we think this is the only way, the United States always reserves the right to bring WTO cases," he said. "But if we can find a path forward that really gets to the underlying problems, this would be a lot better for both countries." (Reporting by Simon Rabinovitch; editing by Roger Crabb)
