MBIE quietly reopens Chinese steel subsidy probe

Friday 21st December 2018

The Ministry of Business Innovation and Employment has officially reopened its investigation into whether China unfairly subsidises its steel exports, three months after the High Court ordered it back to the drawing board.

The ministry hasn't been convinced that Chinese government subsidies on steel products imported into New Zealand are big enough to damage the local industry. However, its reasoning was found wanting by Justice Jillian Mallon, who ordered MBIE to either reconsider an application by Australian-owned New Zealand Steel seeking to impose duties on imports of Chinese galvanised steel coil or to let the steelmaker submit a new application.

Peter Crabtree, MBIE's general manager of science, innovation and international, signed off on reconsidering the application on Wednesday and notification was officially gazetted yesterday.

The notice acknowledges the Sept 18 High Court judgment directing it to reconsider NZ Steel's application and to take account of the reasons for quashing the decision.

Justice Mallon found the decision was unlawful because it was based on material errors in the advice to then-Commerce Minister Jacqui Dean. It fell short on testing whether an entity was meaningfully controlled by a government, and shouldn't have discounted the findings of other similar investigations overseas, given the limited cooperation of the Chinese government.

The judge said that ruling didn't mean MBIE's final report had to be quashed, but that a new document will need to be prepared.

The MBIE investigation into steel coil was the first of three separate applications by Bluescope-steel owned NZ Steel, which claims imported goods are being dumped on the local market and that China is unfairly subsidising its domestic firms. MBIE ultimately deemed the subsidies too small to damage the local manufacturer and found a raft of issues squeezing NZ Steel's margins.

NZ Steel has lodged two subsequent complaints about different products, again failing to convince MBIE of detrimental subsidies in the second case.

However, the third investigation - which covers hollow steel sections sourced from China - is still open and has over-run its October deadline. MBIE's provisional report found minimal levels of subsidies, but the final decision came after the High Court ruling on the first complaint and the ministry hasn't been able to say when it will be wrapped up.

Chinese steel exports have been a bone of contention around the world. US and European producers accused the Asian nation's subsidies and overproduction of undercutting their local industries.

When New Zealand was dragged into the matter there were claims Kiwi firms could face a backlash if the government pursued an anti-dumping probe.

That was against the backdrop of New Zealand seeking to upgrade its free trade agreement with China, and as the US presidential candidates Hillary Clinton and Donald Trump campaigned on protectionist platforms.

Trump ultimately won the White House, and has gone on to impose tariffs on US imports of steel and aluminium earlier this year, capturing New Zealand steel and aluminium, neither of which was granted exemptions that were extended to close US ally, Australia.

Foreign Minister Winston Peters discussed improving bilateral trade relations during his trip to Washington earlier this week, which included meetings with US Vice President Mike Pence, Director of National Intelligence Dan Coats, National Security Adviser John Bolton, and Secretary of State Michael Pompeo.

(BusinessDesk)

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