China allegedly threatens NZ on trade

The Sunday Star Times claims that “behind the scenes” China has threatened “retaliatory measures” against New Zealand trade if inquiries continue into the quality of Chinese supplied steel.

If accurate this is chilling. It puts a small country like us, dependent to a significant degree on trade with China, in a difficult and relatively powerless position.

China threatens reprisals on NZ dairy, wool and kiwifruit if government doesn’t back off cheap steel inquiry

China has threatened “retaliatory measures” against New Zealand trade, warning it will slow the flow of dairy, wool and kiwifruit imports.

The world’s biggest trading nation is angry at New Zealand inquiries into a glut of Chinese steel imports flooding the market; the Chinese believe New Zealand is part of a US-led alliance to target Chinese national interests.

New Zealand is angry that China should take such a combative approach, and is asking that it desist.

New Zealand ‘anger’ may be futile in a trade war between China and the US.

The quality of steel from China is becoming a concern.

Pacific Steel, the sister company of iron miner and processor NZ Steel, has lodged a confidential application, under local and World Trade Organisation rules, for an investigation into China dumping cut-price steel on the New Zealand market.

The local industry is struggling to compete with the glut of sometimes substandard Chinese metal, which is being used in major projects like the $1.4 billion Waterview Connection and bridges on the Waikato Expressway.

Competing with cheap imports from China has been a problem for New Zealand manufacturers for a long time, as has the quality of imported goods.

The durability of structural steel is is of much greater concern than the durability of track pants and onesies.

Right now, lawyers for the Ministry of Business, Innovation and Employment are deciding whether the investigation should proceed, which could result in punitive anti-dumping tariffs against China.

But somehow, China learned of the application – and it is taking retaliatory action.

In the past week, representatives of New Zealand’s biggest export industries have been called in by Chinese officials, and told to exert their influence to make sure the MBIE investigation does not go ahead.

To up the ante, they have been told China has begun consulting with its local food producers about imposing reprisal tariffs to slow down the access of New Zealand dairy, wool, kiwifruit and potentially meat to the 1.35 billion-strong Chinese consumer market.

Local producers are alarmed. 

So the should be – and not just local producers.

A trade war with China is definitely not in our interests,” says Andrew Hoggard, a Manawatu dairy farmer. “It’s about 20 per cent of our markets and we’re getting good market penetration with added value products in there.”

Highly-placed sources have confirmed China is applying pressure in an attempt to sway regulators away from imposing anti-dumping or countervailing duties – which are imposed when goods are subsidised – on imported Chinese steel. Zespri and Fonterra are said to have been heavied, and other exporters may have been.

But I don’t thing New Zealand can compromise on the quality of critical things like structural steel.

The world’s biggest trading nation believes the United States is leading an alliance of sycophantic nations, doing the US bidding by shutting down Chinese trade and trying to force its military out of the contested islands and atolls of the South China Sea.

China’s unusual tactics have caused government and industry to close ranks. The Ministry of Commerce of China (MOFCOM) has denied consulting on retaliatory tariffs. Fonterra spokesman Phil Turner and Zespri’s chief operating officer Simon Limmer both denied any knowledge of the Chinese industry consultation.

But trade expert Charles Finny, who has worked on China-New Zealand trade issues for decades, said sources in Government confirmed at least one major exporter had been told “the Chinese Government would like pressure to be applied to MBIE”.

I don’t think we have a choice – New Zealand has to stand firm on our procedures for dealing with potentially substandard imports of building materials.

If China takes retaliatory action in other markets then we just have to bear the brunt of that. We can’t allow another country – any other country – to dictate how we do things via threats.

It may adversely effect some of our trade but the alternative is worse.

UPDATE:  McClay to follow up on China retaliation claims (NZME)

Trade Minister Todd McClay says he will ask officials to contact the Chinese Embassy in Wellington to clarify China’s position on competition issues.

He was commenting about news reports that China could take retaliatory action against dairy and kiwifruit exports from New Zealand if a formal investigation into alleged steel dumping by China is launched by the Ministry of Business, Innovation and Employment (MBIE).

McClay said he would be asking his officials to contact China’s embassy.

“Certainly I would be asking officials to clarify the Chinese position in as far as any competition issue was concerned,” he said today from Townsville, en route to Indonesia with a trade delegation, where he is meeting up with Prime Minister John Key.

Retaliatory action was serious.

“Market economies don’t do that with each other. WTO [World Trade Organisation] rules don’t allow it,” McClay said.

“I will certainly be talking with my colleagues and the Prime Minister when we get to Indonesia.”