Anti-dumping: U.S. Calls for 256% Tariff on Imports of Steel from China

Introduction

       On December 22, 2015, The U.S. Department of Commerce (“DOC”) made a preliminary decision in its anti-dumping investigations on imports of corrosion-resistant steel, claiming that China, India, Italy and South Korea had been illegally dumping corrosion-resistant steel into the U.S. market. And anti-dumping duties would be adopted to the corrosion-resistant steel. According to the article in Bloomberg Business, imports from China would face a tax up to 256% while imports from the other three countries would face much smaller tax rates from 3.25% to 6.9%. Anti-dumping here is very likely to be a tool for protectionists rather than for fair trades.

       However, to get a conclusion here, we need to solve the question: why do we oppose dumping and what is dumping.

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Anti-dumping: For fair trade, not for protectionism

According to what WTO says, if a company exports a product at a price lower than the price it normally charges on its own home market, it is said to be “dumping” the product. Usually, when a country is recognized by another country as dumping, its dumping products would be imposed an anti-dumping duty similar to a special tariff. The rationale of anti-dumping has the same idea as to what anti-trust means. People who are approve of anti-dumping worry that other countries would be able to take the whole market or eliminate other competitors by adopting dumping strategy and finally receive a monopoly price. However, this idea tries to justify the protections and what it means is that under some circumstances we need protections, which is against what free trade suggests. No matter in Ricardian model or HO model, the idea behind is that countries should do what they have advantages and trade with other countries to improve the total efficiency. Trades benefit both the participants. It is questionable whether companies would choose to give up profits and even sell their products under the costs. And the globally competitive environment is unlikely to create a country monopolizing the market. The lower prices by dumping would only benefit consumers and downstream manufacturers like automobiles or shipment buildings. Anti-dumping, therefore, might not be able to hurt consumers, but acts more like another tool for protectionists.

Problem of corrosion-resistant steel in US: Low productivity, not dumping  

In the corrosion-resistant steel case, according to the data from U.S. Department of Commerce, all other countries involved in the anti-dumping cases finally received a small anti-dumping duty based on their market economy positions. Usually, the cause of anti-dumping cases is concurrent with the increase of certain imports or the reductions of domestic prices. When countries accused of anti-dumping are recognized as having market economy, the problem exposed here might not related to unfair trade and dumping. The low antidumping and countervailing duty rates in these cases simply indicate that the US Steel Industry’s problem is not steel imports. The problem is the US steel industry’s failure to modernize their facilities and remain competitive with the rest of the world, meaning that they lose their comparative advantages. And in these cases, anti-dumping acts as a tool for protectionists instead of a tool to avoid unfair trades.

IMPORT STATISTICS:  Cold-Rolled Steel Flat Products
BRAZIL 2012 2013 2014
Volume (metric tons) 88,600 29,900 89,600
Value (USD) 62,785,000 19,742,000 65,192,000
CHINA 2012 2013 2014
Volume (metric tons) 252,300 242,700 792,300
Value (USD) 179,781,000 155,799,000 513,816,000
INDIA 2012 2013 2014
Volume (metric tons) 6,900 15,900 77,700
Value (USD) 8,682,000 13,915,000 56,888,000
JAPAN 2012 2013 2014
Volume (metric tons) 129,700 140,300 130,700
Value (USD) 157,287,000 158,414,000 142,610,000
KOREA 2012 2013 2014
Volume (metric tons) 156,800 168,100 234,200
Value (USD) 149,147,000 145,903,000 206,349,000
RUSSIA 2012 2013 2014
Volume (metric tons) 0 200 81,100
Value (USD) 0 111,400 54,573,000

 

 

Reference:

  1. US CHINA TRADE WAR–DEVELOPMENTS IN TRADE POLICY, TRADE, PRODUCTS LIABILITY, 337/IP ANTITRUST AND SECURITIES

http://uschinatradewar.com/tag/corrosion-resistant-steel/

  1. U.S. to investigate imports of corrosion-resistant steel by Siyuan Du

http://www.marketwatch.com/story/us-to-investigate-imports-of-corrosion-resistant-steel-2015-06-25

  1. Antidumping and Market Competition: Implications for Emerging Economies by Chad P. Bown, The World Bank and Rachel McCulloch, Brandeis University

http://www.brandeis.edu/departments/economics/RePEc/brd/doc/Brandeis_WP50.pdf

  1. FACT SHEET: Commerce Preliminarily Finds Dumping of Imports of  Corrosion-Resistant Steel Products from China, India, Italy, and Korea, and No Dumping of Imports of Corrosion-Resistant Steel Products from Taiwan

http://enforcement.trade.gov/download/factsheets/factsheet-multiple-corrosion-resistant-steel-products-122215.pdf

  1. Economic Perspectives on Antidumping Law by Alan V. Deardorff, University of Michigan

http://fordschool.umich.edu/rsie/workingpapers/PPP1-25/ppp7.pdf

  1. U.S. Calls for 256% Tariff on Imports of Steel From China

http://www.bloomberg.com/news/articles/2015-12-22/u-s-commerce-department-to-put-256-tariff-on-chinese-steel

  1. A Theory of Dumping and Anti-dumping by Phillip McCalman, Frank St¨ahler, and Gerald Willmann, Preliminary version of February 2009

http://willmann.com/~gerald/dumping.pdf

  1. U.S. Levies Antidumping Duties on Corrosion-Resistant Steel

http://www.zacks.com/stock/news/202254/us-levies-antidumping-duties-on-corrosionresistant-steel

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3 Responses to Anti-dumping: U.S. Calls for 256% Tariff on Imports of Steel from China

  1. Boxi Pang says:

    256% tariff is incredible! Seems that Donald Trump is not the only one who wants to impose high tariffs to imports from China. I totally agree with your view that anti-dumping in this case acts as a tool for protectionists instead of a tool to avoid unfair trades. The low price of steel is a worldwide problem caused by oversupply in the global market, not only owing to Chinese government’s subsidy to steel producers. Also, Chinese government’s subsidy was not aimed at dumping or capturing the entire US steel market, but dealing with excess capacity in steel industry that could not be absorbed in China. China has comparative advantage in producing corrosion-resistant steel due to its low cost and high quality, so importing corrosion-resistant steel should benefit American consumers and downstream manufacturers. But this threatens domestic steel producers in America. Meanwhile, the depression of RMB further decreased the price of corrosion-resistant steel exports, which made domestic producers’ situation worse. The US steel producers should seek for other ways such as modernizing their production to keep their competitiveness.

  2. shaop777 says:

    I totally agree with our opinion towards this case. Anti-dumping is used to avoid the unfair trade instead of protectionism. In this case, the U.S is trying the impose an extremely high tariff to protect their steel industry. Actually, the U.S is creating unfair trade by “Anti-dumping”. From the tariff model we learned, this policy will hurt both parties. Like you mentioned, “the problem is the US steel industry’s failure to modernize their facilities and remain competitive with the rest of the world, meaning that they lose their comparative advantages”. If the U.S want to seize back it comparative advantages in steel industry, it need to update it facilities instead of imposing such a high tariff. Before that decision, the import of cold-rolled steel flat products was increasing every year. Then the U.S. Department of Commerce (“DOC”) made a preliminary decision in its anti-dumping investigations on imports of corrosion-resistant steel on December 22, 2015, it would be really interesting to track the change of trade volume in the U.S’s steel industry, and if the U.S’s steel industry really get any benefit after that.

  3. chnliyi says:

    Anti-dumping war between U.S. and China is not “news” anymore. The 256% tariff on imports of steel from China was just a higher record than before. I agree with your opinion that U.S was just using anti-dumping to protect its steel industry. Controversially, i really don’t think unfair trade can even hold the ground as a sound argument. Some economists would argue that selling products more cheaply abroad than at home was just what companies do if they have segmented markets and demand price elasticities are higher abroad than at home. On the other hand, the share of trade which covered by the dumping cases between China and U.S was merely a little. It could hurt the steel industry in U.S, but not that much. I think the U.S was just using anti-dumping actions to make noise in the media, since the big issue of whether China gets “market economy status” in the WTO is coming this year. If China gets the status, it would be harder for U.S. and EU countries to impose high dumping tariffs.

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