US steel industry wins trade case against China

U.S. steel pipe manufacturers, who have been battling a surge in imports from China, won a major victory Friday when the International Trade Commission cleared the way for the imposition of stiff penalty tariffs for the next five years.

The commission voted 5-0 that the U.S. industry was being harmed by the import of circular steel pipe. The decision marked the first time a U.S. industry has won a decision to impose tariffs on a Chinese product based on the argument that the Chinese government was unfairly subsidizing a Chinese industry.

The ruling means penalty tariffs ranging from 99 percent to 701 percent will be imposed on Chinese imports of circular welded pipe, a form of pipe used in a variety of construction jobs, such as home plumbing and sprinkler systems.

For more than two decades, the U.S. government had refused to consider subsidy cases against the Chinese government because China was classified as a non-market economy.

However, the Bush administration, facing increasing anger over soaring trade deficits with China, reversed course last year and announced it would treat China in the same way as other countries in disputes involving government subsidies.

The pipe case is the first to clear all the government hurdles for the tariffs to go into effect. Last year, the Commerce Department imposed penalty tariffs on imports of Chinese glossy paper, but the trade body blocked the tariffs by ruling that the domestic industry had not proven it was being materially harmed by the imports.

In the pipe case, the Commerce Department found the Chinese government was providing unfair subsidies. It also found that the pipe was being sold in this country below the cost of production, a practice known as dumping. The penalty tariffs for the government subsidies, known as countervailing duties, and the antidumping tariffs were upheld by the trade commission vote.

Chinese exports of circular pipe have exploded since 2002, rising from 10,000 tons that year to 750,000 tons in 2007. The U.S. industry said the increase in imports had resulted in the loss of 500 pipe worker jobs, representing about one-quarter of the work force.

Plants making circular welded pipe, also known as standard pipe, are located in 13 states - Alabama, Arizona, Arkansas, California, Illinois, Iowa, Kansas, Missouri, Ohio, Pennsylvania, Tennessee, Texas and Wisconsin.

The case before the government was filed by six pipe producers and the United Steelworkers union, whose president, Leo Gerard, called the commission ruling a major victory that should send a clear message to China and to politicians in this country.

"China is a trade cheat," Gerard said in a conference call with reporters. "They undermine the market, depress prices and destroy jobs."

Gil Kaplan, a lawyer representing the pipe companies, predicted the ruling could be the first of a wave of victories by U.S. companies battling Chinese imports.

"This decision marks a fundamental turning point in the U.S.-China trade relationship," Kaplan said. "The subsidies that the Chinese are giving a whole host of their manufacturing industries are a big reason the U.S. trade deficit has been growing so rapidly. This is the first time the United States is standing up and saying we are not going to put up with this and we will impose duties to offset the subsidies."

Wang Baodong, a spokesman for the Chinese embassy in Washington, said China had not decided what its next step would be. One possibility would be for China to file a case challenging the penalty tariffs before the World Trade Organization.

"The Chinese government will study the latest development carefully and take appropriate action," Wang said.

The companies bringing the pipe case were Allied Tube & Conduit, IPSCO Tubulars Inc., Northwest Pipe Co., Sharon Tube Co., Western Tube & Conduit Corp. and Wheatland Tube Co.

Reps. Phil English, R-Pa., and Jason Altmire, D-Pa., who are sponsoring legislation that would increase the power of Congress in similar trade cases, said it was disappointing that it had taken so long for the domestic companies and workers to win protection.

"There are other workers who are going to continue to face the risk of losing their jobs to Chinese mercantilism unless Congress looks at this issue and decides to strengthen U.S. trade laws," English said.

Since joining the World Trade Organization in 2001, China has boosted steel-making to the point where by some estimates it has more production capacity than the United States, Japan and the European Union combined. United States Steel Corp. and AK Steel Holding Corp., two big steel companies not involved in the pipe case, said they were encouraged by Friday's decision.

"There's no question that Chinese producers have engaged in unfair trade on a massive scale," said John Armstrong, a spokesman for U.S. Steel in Pittsburgh. "There's also no question that dumped and subsidized imports from China have caused material injury to domestic producers."

The circular welded pipe case is one of a number of cases that have already been filed accusing the Chinese of providing their manufacturers with unfair subsidies. Other cases involve different types of pipe as well as tires, lightweight thermal paper and laminated woven sacks.

The U.S. trade deficit with China hit an all-time high of $256 billion last year, an amount equal to one-third of the total U.S. trade deficit and the largest imbalance ever recorded with a single country. Critics contend that the soaring trade deficits have played a major role in the loss of more than 3 million U.S. manufacturing jobs since 2001.

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On the Net:

International Trade Commission: http://www.usitc.gov/

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AP writers Foster Klug in Washington, Daniel Lovering in Pittsburg and Lisa Cornwell in Cincinnati contributed to this report.