US trade tensions intensify with China

By Sarah O'Connor in Washington, Alan Beattie in London,and Justine Lau in Hong Kong

Published: October 9 2009 03:00 | Last updated: October 9 2009 03:00

Global trade tensions intensified yesterday as the US opened an investigation into Chinese steel imports and clashed with the European Union over chickens.

The US steel pipe investigation is likely to irritate Beijing, which last month accused its biggest trading partner of "rampant protectionism" after Barack Obama, the US president, imposed a heavy duty on imported Chinese tyres.

That decision rattled many economists, who feared that Mr Obama would backtrack on his free trade promises in an attempt to pacify the politically important US unions. Resentment towards China has been growing in the US as the recession pummels manufacturers.

The latest investigation into seamless steel pipes is one of a string that has been opened this year. A petition, filed by several steel companies and the United Steelworkers union, said unfairly low Chinese prices spurred a 218 per cent surge in imports last year to $328m (€222m, £206m). The petition asks for a 98.37 per cent anti-dumping duty as well as countervailing duties aimed at offsetting what it said were Chinese government subsidies. Beijing, which was on National Day holiday yesterday, has not reacted to the announcement. Such investigations are common and do not necessarily turn into tariffs but the move is likely to exacerbate China's fears that US companies have been encouraged by the tyres case to ask for more protection.

Yu Li of Winston & Strawn, a law firm, said: "The trade law has been around for some time and I think more US companies would make use of it as they look for someone to blame for falling profitability."

China has become a clear target amid the global downturn, and not just for US companies. Across the world, industry demands for new import restrictions on China rose 23 per cent in 2008 and are expected to increase again in 2009.

Another potential flashpoint between the US and China looms next week as the US Treasury prepares to declare whether or not Beijing is manipulating its currency. The US also escalated a dispute with Brussels over restrictions on imports of US poultry, asking the World Trade Organisation to open a dispute settlement panel.

The office of the US Trade Representative said: "The US poultry subject to the EU ban is safe. We regret that formal WTO consultations and significant US engagement over many years have not resulted in the lifting of the EU's ban."

The US has complained the EU has blocked chicken meat washed with chlorine and other chemicals even though US and European scientific agencies have concluded such treatments were safe for consumers.