China needs to be vigilant toward rising US protectionism on behalf of its steel sector

By Hu Weijia Source:Global Times Published: 2016-6-6 0:18:01

It is worrisome that there could be a possible escalation of trade tensions between the world's two largest economies amid allegations of theft of trade secrets and price fixing.

Forty Chinese steel producers and their distributors are currently considering their response to the Section 337 investigation initiated by the US International Trade Commission (USITC), and they face the risk of some carbon and alloy steel products being barred from the US market permanently.

This is the first time that Chinese steel producers have faced a Section 337 investigation. It was instituted as part of the US Tariff Act, which deals with allegations of patent or registered trademark infringement.

The USITC said on May 26 that it had voted to initiate an investigation against certain steel products from China after US Steel Corporation claimed major Chinese steel producers had stolen US Steel's trade secrets, conspired to fix prices and control output and export volumes.

Analysts said the USITC had lowered its threshold for initiating a Section 337 investigation, given that the investigation used to be aimed mainly at trade disputes relating to intellectual property rights, rather than monopolistic practices such as fixing prices and controlling output. According to media reports, this is the first time the USITC has got involved in an anti-monopoly probe.

The probe comes at a time when many US steel enterprises are encountering difficulties and the US government is facing pressure from big steel syndicates to restrict imports of steel products. Against this backdrop, the USITC's move reflects to a certain extent a rise in trade protectionism in the US.

There may also be political considerations involved, with the government taking a tougher line on China to drum up more support amid the US presidential campaign.

From previous anti-dumping and anti-subsidy probes imposed on Chinese steel products to the current Section 337 investigation, the US has tightened the screws on China-made steel products.

Chinese enterprises only faced countervailing duties in the past, but US steel firms can seek a ban on imports from Chinese rivals if China suffers a setback in the Section 337 investigation.

However, increased protectionism will disrupt trade rather than solving US steel industry problems.

It is unwise for the US to protect its backward steel industry from competition at the cost of disrupting normal trade with China, which is one of its most important overseas markets. It is clear that a large number of US exporters would suffer losses if the two countries fall into a confrontation over trade issues.

It is lamentable that the US, which has always flaunted its liberalization of trade, now engages in trade protectionism. To some extent, US actions have an influence on other nations. In this regard, we need to be vigilant about further protectionism, which would bring more uncertainty for the world economy.

The author is a reporter with the Global Times.

Posted in: It's Your Business, Eye on The Economy

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