By Jason Simpkins
Managing Editor
Money Morning

There has been a spate of trade tiffs over the past few months, but relations appeared to be on the mend after a high-level meeting between trade officials at the Chinese city of Hangzhou. Now, as President Obama prepares to make his first official trip to China, tempers are again flaring.

The United States, Europe, and Mexico have asked the World Trade Organization (WTO) to arrange a dispute settlement panel to investigate Chinese restrictions on exports of certain industrial metals. The WTO complaint claims that Chinese restrictions on exports such as bauxite and magnesium are driving up the prices of steel, aluminum, and chemical products.

“China’s restrictions on raw materials continue to distort competition and increase global prices, making conditions for our companies even more difficult in this economic climate,” said Catherine Ashton, the European Union’s (EU) trade commissioner.

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Beijing applies an export duty of as high as 15% on some of its materials. However, China’s Ministry of Commerce contends that those duties are in place to protect the environment by increasing the cost of extraction. The ministry also disputed Ashton’s claim that such taxes are making it harder for Western companies to emerge from the recession.

“The overseas demand for those products has been shrinking, so it is an exaggeration to say that China’s measure would affect the EU or U.S. steel industry’s recovery from the financial crisis,” it said.

Dustups like these have become commonplace between China and its Western consumers, who continue to accuse Beijing of keeping its currency artificially undervalued to favor its exports. But with the economy still under duress from the weight of the financial collapse, talks have taken on a new sense of urgency and led to more direct action.

President Obama in September imposed a 35% tariff – on top of the existing 4% duty – on Chinese tires coming into the United States. That order came mainly at the behest of the United Steelworkers union, which says 5,000 union jobs have been lost since 2004 because low-cost Chinese tires are flooding the market. From 2004 to 2008, the number of tire imports from China has tripled.

That was followed in October by a U.S. investigation into seamless steel pipe imports from China. The government agency will make a decision on preliminary anti-dumping duties in December and could impose new duties of almost 100% on imports of steel pipes from China as soon as February.

China responded with an “anti-dumping” probe into U.S. auto parts and chicken meat imports. Beijing is also investigating Detroit’s “Big Three” automakers to determine whether or not they are receiving U.S. government subsidies, or selling their products in China below market costs.

It looked as though tensions between the two nations had cooled last week at the culmination of the Joint Commission on Commerce and Trade (JCCT), when China said it would lift a ban on U.S. pork imports that it imposed last spring because of fears about swine flu.

“China’s intent to remove its H1N1-related bank on U.S. pork marks an important step forward in cooperation between the countries on agriculture issues,” Agriculture Secretary Tom Vilsack said in a statement.

But with the United States’ latest appeal to the WTO, China is again fuming.

“Once again, ‘made-in-China’ has fallen victim to U.S. trade protectionist measures,” lamented article in Xinhua, China’s state-run newspaper. “And it is hardly a week after Washington pledged actions against trade and investment protectionism at the 20th China-U.S. Joint Commission on Commerce and Trade (JCCT) talks in China’s eastern city of Hangzhou.”

The paper also took direct aim at President Obama who will visit China from Nov. 15-18.

“Recent protectionist moves in the United States are closely linked to its sluggish economic growth and domestic political tussles, but a strong leader should have the guts to be more far-sighted and deliver the pledge he or she has made,” the paper said.

News and Related Story Links:

• Financial Times:
  China faces export inquiry

• Money Morning:
  Steel Pipe Probe Could Escalate U.S.-China Trade Feud

• Money Morning:
  U.S. Trade Spat with China Escalates, But is Unlikely to Cause a Significant Rift

• Xinhua:
  U.S. needs to match words with deeds on anti-protectionism

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