Wall Street Journal (4.23.10)

China Sets Antidumping Probe

Investigation of Chemical Imports Follows U.S. Move to Look Into Aluminum Trade

BEIJING—China's Commerce Ministry launched antidumping inquiries into imports of a chemical product and optical fiber from the European Union and the U.S.—an apparent response to Wednesday's move by the U.S. to investigate Chinese aluminum.

China also finalized an antidumping ruling on some nylon imports. Analysts say the latest moves by both countries could possibly revive strains over trade and currency that had eased in recent weeks.

Beijing has recently become more aggressive in trade disputes, and the nylon ruling, stemming from an investigation that began a year ago, comes ahead of high-level bilateral talks between China and its two largest trading partners, the EU and the U.S.

In finalizing the ruling on imports of nylon 6, or polycaprolactam, from the U.S., the EU, Russia and Taiwan, China hit the U.S. with the highest duty for the material, which is used to make goods ranging from toothbrushes to gun frames to chiffon.

The ministry also launched probes into imports of two products: The first is caprolactam, a widely used synthetic polymer that the government was asked to investigate last month by two units of China Petroleum & Chemical Corp. The second is a kind of optical fiber used in telecom transmission. Several local manufacturers had asked the ministry to investigate the imports. Both investigations will last for 12 months and can be extended until October 2011 under special circumstances, the ministry said.

The measures come on the heels of the U.S. Commerce Department's move to launch an investigation into whether certain forms of aluminum made in China are being unfairly subsidized and dumped, or sold at less than the fair value, in the U.S. market. At issue are Chinese-made aluminum forms used in window and door frames as well as gutters and elements in cars, trucks and boats.

The U.S. investigation, sought by American makers of the aluminum products and the union representing their workers, could lead to imposition of duties on the Chinese imports as soon as June, if the Commerce Department finds evidence of unfair trade practices.

Tariff Tradeoffs

Escalating trade disputes between U.S. and China

· Sept. 11, 2009: The United States says it is going to impose stiff tariffs on tires that are made in China

· Sept. 13: China says it will review complaints about American exporters of chicken products and automotive products.

· Oct. 7: The U.S. says it is probing whether to impose antidumping and countervailing duties on imports of steel pipes from China.

· Oct. 20: China imposes preliminary antidumping duties on nylon imports from the U.S., as well as from the European Union, Russia and Taiwan.

· Nov. 1: China announces antidumping tariffs on imports from the U.S., Europe and South Korea of adipic acid, a chemical used to make nylon.

· Nov. 5: The U.S. says it is imposing preliminary duties on steelpipe imports from China.

· Nov. 6: A U.S. trade panel allows antidumping probes of coated paper from China and Indonesia, and of phosphate salts from China to go forward.

· Nov. 6: China starts its own probe into imports of some cars from the U.S.

· Nov. 24: The U.S. imposes duties on Chinese steel pipes used by the oil industry.

· Feb. 5, 2010: China imposes preliminary import duties on U.S. chicken products.

· April 10: The U.S. says it is finalizing duties on Chinese steelpipe imports.

· April 13: China says it has imposed duties on imports from the U.S. and Russia of electrical steel used in the power sector

· April 21: The U.S. launches an investigation into whether certain forms of China-made aluminum are being unfairly subsidized and dumped in the U.S.

· April 22: China says it is launching antidumping probes into imports of a chemical product and optical fiber from the EU and the U.S., and that it has finalized duties on nylon imports from U.S., the European Union, Russia and Taiwan.

The U.S. manufacturers also alleged in their petition that the undervaluation of the Chinese yuan serves as an unfair subsidy. But Wednesday's decision to start an inquiry doesn't rule one way or the other on that allegation, and a U.S. Commerce Department official said, "We are still considering the specific allegation on currency manipulation."

U.S. companies previously petitioned the U.S. government—in 10 other cases over the past few years—to investigate whether an undervalued Chinese currency served as a de facto subsidy for its exports. U.S. government officials, in each of those cases, declined to pursue investigations, citing insufficient information.

Before the department makes a preliminary decision on whether to impose punitive tariffs, the U.S. International Trade Commission must first determine whether the increase in imports has harmed U.S. manufacturers. That "injury" determination is expected by May 17. If the ITC delivers an affirmative decision, Commerce could impose countervailing duties as early as June 24 and antidumping duties by Sept. 7.

The U.S. is already pursuing a separate investigation into allegations of unfair trade practices involving Chinese coated paper.

European Commission President José Manuel Barroso is leading a delegation of EU commissioners at the end of this month for talks with China Premier Wen Jiabao. In late May, the U.S. and China will hold their Strategic and Economic Dialogue in Beijing.