Gordon Campbell on China Steel Dumping Allegations

First published on Werewolf

Over the course of the past decade, MFAT had managed to concoct a China policy of infinite subtlety, a gossamer illusion that – alas – China has just stomped into the dust. Apparently, if we object to their cheap, subgrade steel being jettisoned here, they’ll attack our kiwifruit exports. Quite a wake-up call. Until quite recently, New Zealand had convinced itself it was Beijing’s Best Friend in the West. Hadn’t we been rewarded with the first free trade deal that Beijing signed with a Western country? (It had helped that we – alone among Western countries – had virtually no tariff barriers to put in the way of China unloading its stuff on our economy. No wonder they liked the cut of our jib.)

Our courtship of the Chinese went way beyond trade and immigration policy. On defence issues, the Key government has tried very, very hard to convince China that we don’t take our orders directly from Washington any more. That’s why we haven’t echoed the crude anti-Chinese defence rhetoric that’s been emanating from Canberra. In Beijing last year, Defence Minister Gerry Brownlee said flatly that China wasn’t seen by us as posing any threat to the Asia-Pacific region for the foreseeable. Moreover and furthermore:

Brownlee also called China a “strategic partner” and lavishly praised our “Five Year Engagement Plan with the Peoples’ Liberation Army..”….. Interestingly, Brownlee also said : “We do not see our defence relationships with the United States and China as mutually exclusive.” So the Chinese, it would seem, are seen by the Key government as our military allies, as well as our partners in trade. This perspective is quite different from the one outlined in the recent Australian Defence White Paper.

No doubt, officials on the China desk at MFAT have prided themselves on fashioning a niche position for New Zealand right in between the US and China – and leveraging off both of them ! – while also playing a more agile game towards China than their lumbering counterparts in Canberra. Well, as the Aussies would say, of MFAT : tell ‘em they’re dreaming. Hopefully, the steel dumping issue will have blown away our cocktail circuit illusion that we’re China’s best pal, ever.

The immediate problem has been well described elsewhere. Over the past 18 months, the slowdown in the Chinese economy has led to vast stockpiles of steel lying idle at China’s mills. This over-supply has been exported cheaply - thereby

forcing down global steel prices for everyone else. This has put thousands of jobs at risk in the UK and across Europe. Reportedly, Chinese steel exports to the EU rose 28% during the first quarter of this year, while driving prices down by more than 30%.

In the north of England alone, China’s steel dumping has put an estimated 11,000 jobs at risk, and this prospect cast a long shadow over the recent Brexit vote. Ironically, the “Leave” leaders blamed those UK steeltown job losses on the EU’s failure to impose tariffs on Chinese steel. In fact, it had been Britain’s own Conservative government – along with several other EU countries – that had vetoed the EU’s plans to raise steel tariffs on China, alongside a range of other measures. It has been another ‘own goal’ for the Brexiteers. A proposed merger deal between Tata Steel and the German ThyssenKrupp company may now rescue at least some of those steel industry jobs in England.

Dumping or market forces?

True, one can quibble as to whether China’s actions are in fact, “dumping” - or merely a case of China using the competitive advantage it enjoys by dint of its low labour costs, lax environmental standards, ready access to raw materials etc. “Dumping” is deemed to occur when things are sold at below the cost of production. Thanks to massive state subsidies, China’s steel mills can afford to do so. (Internally, the steel industry jobs reliant on hose subsidies are seen by China’s rulers as crucial to social stability. The unemployment and social decay suffered by the West’s steel towns are not considered acceptable by China. ) Currently under WTO rules, China enjoys the equivalent of ‘developing’ country status and might be able to defend its actions to date. By year’s end however, China’s steel production subsidies will become open to WTO challenge.

The Americans have decided not to wait. Earlier this year, the US raised its tariffs on Chinese steel from 266% to 522%, and cited (as its main reason for doing so) China’s refusal to co-operate with anti-dumping investigations.

Good luck then to New Zealand in trying to mount any meaningful investigation of what China is up to. We are the least important - and most easily intimidated – source of their problems. Globally, China is facing a backlash over its steel pricing, and is responding with typical defiance.

New Zealand has two entwined issues: (a) the dumping of China’s surplus steal and its damaging effect on NZ’s own steel industry and (b) the poor quality of this cheap Chinese imported steel, which RNZ have amply exposed over recent months. You might have thought New Zealand would have already learned the folly of chasing low prices from Chinese exporters. Kiwirail’s chronic problems with its asbestos-contaminated Chinese-made railway locomotives had set a bad enough precedent.

The sorry saga of the Chinese-made locomotives seems doubly outrageous when one recalls that the Hillside plant in south Dunedin could have (a) built those locomotives without the cost and the risk of asbestos de-contamination (b) created hundreds of jobs in a depressed part of the Dunedin community, and (c) added significantly to New Zealand manufacturing IP in the process. Obviously then, choosing a cheap price from China is a suckers’ game. We may now be stuck for years with the consequences of utilizing sub-grade Chinese steel in our transport infrastructure, and within the Christchurch rebuild.

The last time our exports got threatened by a major nation was when France threatened trade retaliation in the 1980s, if New Zealand responded too strongly to the Rainbow Warrior outrage. In the end, France proved far more amenable to an arbitrated outcome than China looks willing to consider. Unfortunately, our government has looked like a deer trapped in the headlights. Prime Minister John Key has sought to downplay the threat of a Chinese response if and when MBIE chooses to investigate whether dumping has occurred here – assuming that a complaint against dumping had been lodged, which Key claimed he couldn’t confirm, on confidentiality grounds. Curiously Key also seemed to feel the onus was on China’s ambassador to contact him about the dumping issue:

Key said he could not confirm whether the Ministry of Business, Innovation and Employment (MBIE) had received a complaint about Chinese steel imports, because of the confidentiality of the complaints regime.

But the Government had received "no indications" of Chinese concerns about possible anti-dumping duties, or potential retribution….. "I regularly see the Chinese leadership, the Chinese ambassador has my phone number if he wants to pick it up and make a phone call….”

By contrast, the US and EU countries seem able to talk freely about China’s dumping practices and the range of possible responses open to them. They also don’t seem to feel the need to wait for more evidence before acting. Embarrassingly, Trade Minister Todd McClay has tried to sound tough, but has merely sounded bemused:

Trade Minister Todd McClay says he will be asking officials to contact the Chinese embassy in Wellington to clarify its position on competition issues… "Certainly I would be asking officials to clarify the Chinese position in as far as any competition issue was concerned," McClay said today…. MBIE is understood to have received two complaints from New Zealand steel producers about Chinese steel flooding the New Zealand market.

Ultimately, China is likely to show the same contempt for a WTO ruling on steel dumping as it has to the International Court of Justice ruling on the disputed territory in the South China Sea. So, we may as well spare the niceties and act now (while there’s still time) to defend our own steel industry. The Key government could for instance, put a freeze on the importation of cheap/nasty Chinese steel for use on our major infrastructural projects, pending further inquiries. Obviously, China is not our friend. As Henry Kissinger used to say, countries don’t have permanent friends or enemies, only interests. Perhaps its time we started defending them.

Alan Vega R.I.P

In the late 1970s, the New York duo of Alan Vega and Martin Rev – under the name Suicide – created a vastly influential blend of punk aggression and minimalist electronica. Live, Vega tended to be provocatively obnoxious. In the studio, Suicide ranged from brief, intensely romantic tracks ( ‘Jukebox Babe” ‘Shadazz’ ‘Dream Baby Dream’ ‘Ghost Rider’ etc ) to full blown psychodrama epics of murder and insanity such as ‘Frankie Teardrop’...

Suicide were an influence on Lou Reed’s “Street Hassle’ phase, and on early Bruce Springsteen who - in later years- made “ Dream Baby Dream” a regular part of his concert set. Vega died last week at the age of 78. Here’s “ Be Bop Kid” from Suicide’s first album on Ze, set to some terrific footage from Japan….

Finally, two classic cuts from 1977…. ‘Cheree’ and ‘Ghost Rider’ …

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