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Steel dumping issue isn't over yet

NZ NewswireNZ Newswire 22/07/2016

The government could have been a lot tidier in the way it handled the report about a complaint that China was dumping steel in the New Zealand market, says NZ Newswire political writer Peter Wilson.

Does the Ministry of Foreign Affairs and Trade really have a "cringing pathological fear of doing anything to upset China"?

The ministry would deny Peter Dunne's description of its attitude, but this week's antics over allegations that China is dumping cut-price steel in the New Zealand market haven't done it any favours.

It started with a Fairfax report that Pacific Steel had lodged an application with the Ministry of Business, Innovation and Employment for an investigation into alleged product dumping by China - exporting goods at below home-market prices.

China has a vast amount of steel it can't sell on the domestic market because of a slowing economy, and it's offloading it elsewhere.

The industry is in strife, and has been given tax rebates.

Two months ago, the United States imposed 500 per cent tariffs on cold-rolled Chinese steel. The European Union is considering similar action.

China was told about the Pacific Steel application, because it had to be under the terms of its free trade agreement with New Zealand.

It's reaction, according to the Fairfax report, was to warn New Zealand exporters there would be consequences if the investigation went ahead.

China is known for aggressive diplomacy, but that was way out of line.

Countries have a right under international trade rules to investigate allegations of dumping and no decision had been taken - it still hasn't been taken - on whether there will be one.

The government's initial reaction was dismissive.

Prime Minister John Key and Trade Minister Todd McClay, who were both in Indonesia, didn't know anything about it.

They hadn't been told about any Chinese pressure on New Zealand exporters.

"There is no investigation so this is all hypothetical anyway," said McClay.

However, he asked his officials to contact the Chinese embassy in Wellington.

Then he recalled that two weeks previously, when he was in Beijing, the New Zealand embassy there had told him "a Chinese industry body" had approached a New Zealand exporter "raising some concerns".

The embassy checked this out with the Ministry of Commerce of China, its equivalent to a ministry of trade.

"They have said they have no knowledge of it and they have denied it, and it has been put down to absolutely unsubstantiated rumour," McClay told reporters.

Then Zespri, which has an office in China, outed itself as the New Zealand exporter which had been on the receiving end of a retaliatory threat.

It said a local staff member received "unsubstantiated information" from an industry body, which it passed on the the Beijing embassy.

While Key and McClay were continuing to display their unconcern, there was a fair bit of diplomatic activity in Wellington.

Finally, Key was able to say: "What we are aware of is a meeting between the Chinese ambassador to New Zealand and New Zealand officials where there has been an absolute assurance given that there won't be any reprisals of actions taken against New Zealand in the hypothetical case that there was a further investigation, or an investigation, into steel issues in New Zealand."

It's far from over.

MBIE has to decide whether to launch an investigation.

And despite the way the issue has been handled, it can do that with China's on-the-record assurance that there won't be any retaliation.

That may have been why "highly-placed sources" told Fairfax about the complaint in the first place.

But if it doesn't investigate, it will be seen as caving in to pressure from a huge and powerful trade partner.

That's what drove Dunne to come out with his "cringing pathological fear" comment.

The United Future leader, a government ally, used his weekly blog to vent his concern.

"As we have become closer to China economically and politically, our policy approach has simply become more timid and craven," he wrote.

"When the Lange government's anti-nuclear policy was at its peak, international commentators used to describe New Zealand as the mouse that roared.

"Now, they could just as accurately describe us as the mouse that scuttled for cover."

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