USTR Initiates Consultation with China Over GOES AD/CV Duties
The U.S. requested consultation on Jan. 13 with China over antidumping and countervailing duties imposed on U.S. grain oriented flat-rolled electrical steel (GOES) exports to the country, U.S. Trade Representative (USTR) officials, including USTR chief Michael Froman, told reporters at a press conference. The U.S. says the duties, initially imposed in 2010, fail to meet World Trade Organization (WTO) Dispute Settlement Body (DSB) recommendations for compliance and continue to violate WTO agreements, the officials said.
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“China’s duties effectively blocked U.S. exports of GOES to China. Before China imposed these duties, U.S. exports of GOES amounted to more than $250 million a year. The year after China imposed the duties, the value of U.S. exports of GOES fell to $3 million,” said Froman. The DSB originally established a panel to address the dispute in March 2011. “We were right, and China was wrong. The WTO found that China’s duties are inconsistent with WTO rules. And unfortunately, it appears that China has not corrected those inconsistencies.”
The consultations must take place within 15 days, at which point the U.S. will determine if Chinese concessions are adequate, said a USTR attorney speaking at the press conference. Should the U.S. reject Chinese concessions, U.S. officials will move to establish another compliance panel, said the USTR attorney. The DSB arbitrator assigned to the dispute previously determined China was mandated to bring its treatment of U.S.-exported GOES into compliance by July 31, 2013 (here). Following the expiration of the compliance period, China agreed to consult with the U.S. if the U.S. determined consultations necessary, said the USTR attorney.
“China took some steps during its compliance panel last year. They were insufficient steps in our view, particularly with respect to the injury determination,” said the USTR attorney. “This is the stage…when a country has not done what the WTO has found…where they’ve been found to be violating WTO rules. We are asking this panel to affirm our view that in fact they have not followed WTO rules. They are still in violation and they need to take further steps to bring themselves into compliance.” This marks the first time the U.S. has initiated a proceeding with China at the WTO to contest a Chinese compliance claim, the USTR said in a press release (here).
The USTR attorney refused to comment on specific, subsequent actions the U.S. will take, in the event the WTO sides with the U.S. and China continues to fail to adequately address U.S. concerns. The USTR attorney also declined to comment on whether the U.S. would accept any AD/CVD measures on GOES. “If a compliance panel is convened by a country and the defending country is found to be out of compliance, and the defending country does not bring itself into compliance, then the complaining country is allowed to request suspension of trade concessions, what is commonly called retaliation,” said the USTR attorney. China did decrease CVD rates from an initial 11 and 20 percent to 3.4 percent, the USTR attorney added.
Based on precedent, the WTO may take six to nine months after consultations conclude to evaluate Chinese compliance, said the USTR attorney. By continuing to contest the Chinese AD/CVD measures, the U.S. is seeking to boost GOES exports that have plummeted since 2010, said the USTR attorney. “Before China took this action fully one third of our exports went to China,” said the USTR attorney, referring strictly to GOES. “As a result of China’s action our exports dropped from $250 million to three. That’s one percent of what we were selling before.”
Ohio-based AK Steel Corporation and Pennsylvania-based Allegheny Ludlum manufacture GOES, said the USTR press release. The power generating industry primarily uses GOES in transformers, rectifiers, reactors, and large electric machines, said USTR. “When you lose a third of your market you go looking for other places to sell your product. The fact is we have lost a third of our markets," said the USTR attorney. "We have lost $250 million in sales…that we otherwise would have. So regardless of whether they’re able to find other markets to sell their product in, its important this market be open to us and this unfair barrier be removed.”
The AK Steel Corporation rejects Chinese allegations of unfair subsidies and applauds the USTR continued pursuit of WTO arbitration, said an AK Steel spokesman. "If these consultations fail to resolve the matter, AK Steel will urge the United States to request compliance proceedings," said the AK Steel spokesman. "AK Steel expects that such proceedings would confirm that China's continued imposition of duties on imports of GOES from the United States fails to comply with the WTO’s recommendations and rulings. The United States could then seek authorization to impose retaliatory tariffs against certain Chinese imports until China comes into compliance." Allegheny Ludlum did not respond for comment.
The WTO dispute mechanism safeguards countries from efforts to improperly use remedy laws to foster domestic industry growth, said the USTR attorney. “To ensure that Americans see the full benefit of the rules and market access we have negotiated in our international trade agreements, the President put enforcement of America’s trade rights in on a par with opening markets for U.S. exports,” said Froman. “We’ve brought real emphasis to the enforcement agenda. Starting in 2009, we doubled the rate of enforcement cases and enforcement actions.” -- Brian Dabbs