US clashes with EU and China on trade

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US clashes with EU and China on trade

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

Published: October 8 2009 18:49 | Last updated: October 8 2009 18:49

Global trade tensions ratcheted up on Thursday 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 President Barack Obama 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 on Thursday, 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.

China has become a clear target amid the global downturn, and not just for US companies.

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 on Thursday over restrictions on imports of US poultry, asking the World Trade Organisation to open a dispute settlement panel.

"The US poultry subject to the EU ban is safe," said Nefeterius McPherson, a USTR spokeswoman. "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 long complained that the EU has blocked chicken meat washed with chlorine and other chemicals from sale in Europe, despite both US and European scientific agencies concluding that such treatments were safe for consumers. But a panel of the chief veterinary officers of the EU member states rejected the treatments late last year. The outgoing Bush administration started legal proceedings against the EU in January, and negotiations since have failed to resolve the issue.

A European Commission spokesman said that litigation was not the appropriate way to deal with such complex issues. "However, since the US has chosen this path, we will defend our food safety legislation," the spokesman said.

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Edited October 8, 2009 by Madame Cleo