United States

US backing for world currency stuns markets, US dollar falls

US Treasury Secretary Tim Geithner shocked global markets by revealing that Washington is “quite open” to Chinese proposals for the gradual development of a global reserve currency run by the International Monetary Fund.

China Launches WTO Dispute Against US Shrimp Duties

The US finds its controversial practice of ‘zeroing’ in the line of fire again, as China on Monday initiated WTO dispute proceedings over Washington’s anti-dumping duties on Chinese shrimp.

Despite having lost several WTO cases on the issue, most recently against Brazil for duties on orange juice, Washington responded coldly to China’s challenge.

“The decision now by China to pursue new claims against the United States on zeroing only complicates resolution of this issue,” said Nefeterius McPherson, a spokesperson for the US trade representative’s office.

WTO rules authorise governments to levy ‘anti-dumping’ duties on goods it determines to be ‘dumped’, i.e., sold abroad for less than the price they command in the exporter’s home market, if they are injuring domestic competitors. ‘Zeroing’ refers to the practice by US commerce authorities of ignoring (or ‘zeroing out’) instances where imported goods cost more in the US than in the exporter’s market. Critics of zeroing argue that it artificially inflates anti-dumping margins, making them even more trade-restrictive. Last December, the US Department of Commerce proposed to end the use of zeroing in annual reviews of existing anti-dumping measures, in an effort to stave off retaliation from major trading partners (for more information on that proposal see here). The proposal is still open for public comment, but has drawn the ire of some lawmakers and industry representatives, according to Inside US Trade, a Washington-based trade publication.

China has decided to pursue what it sees as a legitimate claim. “Once the cancellation of zeroing was approved officially, it should have applied to all global trade cases,” Zhang Aiqing, a former director of the department of treaty and law in the commerce ministry, told China Daily.

At issue in the complaint are US anti-dumping duties on Chinese shrimp that date back to 2005. Initially fixed in the realm of 27 to 82 percent, the duties were dropped to 5 to 8 percent after Beijing successfully appealed to the US International Trade Commission (ITC), the quasi-judicial body that determines the rate of duties. Nevertheless, China’s Ministry of Commerce complains that the levies remain in violation of WTO rules, and continue to impair the interests of its shrimp producers.

The US ITC will next month vote on whether to extend its duties on imported shrimp from China and other countries for an additional five years. US shrimpers in the Gulf of Mexico are still reeling from the effects of last year’s massive BP oil spill, and have pushed for the extension of the duties.

China’s request for consultations is the first step in the WTO dispute settlement process. If the two sides cannot reach a negotiated settlement within 60 days, Beijing will have the option of requesting a panel to hear the dispute.

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China Blocks U.S. Call for WTO Rulings on Credit Cards, Steel

China blocked a request by the U.S. for World Trade Organization judges to rule on the legality of Chinese anti-dumping duties on steel products and restrictions on companies that process credit-card payments.

The U.S. made the request today in Geneva, five months after asking for consultations with China aimed at resolving the two disputes. China can’t block a second request, likely to come in March.

The U.S. is protesting limits on payment processing by companies such as Visa Inc. and MasterCard Inc. because China favors a monopoly provider, China UnionPay Data Co. China prohibits foreign companies from issuing their own bank cards denominated in its currency, building networks to support such cards or processing interbank point-of-sale transactions.

Foreign banks must “co-brand” with Chinese operators to supply these services and execute payments through UnionPay. The U.S. Trade Representative’s office says the rules run counter to the pledge China made when it joined the WTO in 2001 to open up its credit- and debit-card markets to foreign processing companies by the end of 2006.

The U.S. also wants WTO judges to rule on the legality of dumping duties China imposed on more than $200 million of American-made steel products. The complaint involves dumping and countervailing duties China has placed on flat-rolled steel, which is produced by companies such as West Chester, Ohio-based AK Steel Holding Corp., the third-largest U.S. steelmaker.

China, the world’s biggest steel market, said in 2009 it would apply anti-dumping and subsidy levies of as much as 25 percent on flat-rolled electrical steel products, used in transformers, reactors and electric machines. China said the duties aim to counter below-cost or “dumped” imports of the goods.

The U.S. says China didn’t follow WTO procedures by failing to disclose the facts underlying its legal conclusions and not explaining its calculations.

Read rest of the article here on Bloomberg

US:Doha trade talks finally dealing with substance

Feb 17 – An intensive week of talks among key trading powers was constructive and the long-running Doha negotiations have finally started to deal with matters of substance, the U.S. ambassador to the World Trade Organization said on Thursday.

“My sense is that we’re finally starting to do the things we need to do, which is grapple with the really hard issues,” U.S. envoy Michael Punke told Reuters after a week of meetings among 11 major WTO members including the United States.

“We’re in a mode right now where we’re talking about substance.”
Original article on Reuters
(Reporting by Jonathan Lynn; Editing by Stephanie Nebehay)

U.S. files two new trade cases against China with WTO

The Obama administration said Friday that it had launched two new appeals against China to the World Trade Organization as new data showed the trade gap between the two countries rose to a record level last year.

The new appeals to the WTO are part of an evolving administration strategy to press China for better market access while playing down the high-profile dispute over how Chinese authorities manage the value of the country’s currency.

The latest cases attack import duties imposed on certain types of U.S. steel and challenge the virtual monopoly over electronic payment processing granted to a state-owned Chinese company. They come on top of other trade actions filed by the administration, including the tariffs on imported Chinese tires and a high-profile challenge of the subsidies and other support that the country provides to its alternative-energy industries.

“In each of these cases, [the United States] will be pressing to ensure that we obtain the trade benefits provided by the WTO agreement,” U.S. Trade Representative Ron Kirk said in a statement.

Wang Baodong, spokesman for China’s embassy in the United States, said China conducts business “strictly in accordance with its WTO and bilateral commitments.”

“We stand for settling trade disputes with other countries through consultations on an equal footing,” Wang added.

In talks last year, China appealed to the Obama administration to hold off on imposing duties and appealing to the WTO, urging negotiations on trade tensions between the countries.

The WTO and other trade actions come as the Obama administration has become less concerned about China’s management of the value of its currency, the renminbi.

Many economists say the value of the currency is being held at an artificially low level as a way for China to help its exporters, whose goods are comparatively less expensive because of the exchange rate.

The issue has been politically volatile in the United States, and this week members of Congress reintroduced legislation, approved by the House last year, that would impose duties to offset the effects of an undervalued currency.

But Chinese officials have been allowing the renminbi to rise in value, and many longtime critics of China’s currency management say recent signs are encouraging. Including the effect of inflation and a recent drop in the value of the dollar, the Chinese currency is appreciating at a rate of about 10 percent a year.

“We may be on the road” to a renminbi that trades at close to its market value, at least in relation to the dollar, said C. Fred Bergsten, head of the Peterson Institute for International Economics, who has denounced China’s currency management.

There is a similar feeling among U.S. officials that recent changes in how the renminbi can be bought and sold outside China, if sustained and expanded, will lessen central government control over the exchange rate.

China’s central bank controls the exchange rate by actively buying or selling renminbi in exchange for dollars, increasing supply or demand as needed. The more the currency is bought and sold around the world, independent of those transactions, the more difficult it will be for the central bank to manage the rate.

The U.S. trade deficit with China hit a record $273 billion in 2010 as $91 billion worth of U.S. exports to the country were exceeded by Chinese imports.

Read the rest of this article at the Washington Post

Sharp reversal, U.S. agrees to rebuke Israel in Security Council

The U.S. informed Arab governments Tuesday that it will support a U.N. Security Council statement reaffirming that the 15-nation body “does not accept the legitimacy of continued Israeli settlement activity,” a move aimed at avoiding the prospect of having to veto a stronger Palestinian resolution calling the settlements illegal.

But the Palestinian’s rejected the American offer following a meeting late Wednesdy of Arab representativs and said it is planning to press for a vote on its resolution Friday, according officials familar with the issue. The decision to reject the American offer raised the prospects that the Obama adminstration may cast its first ever veto in the U.N. Security Council.

Still, the U.S. offer signaled a renewed willingness to seek a way out of the current impasse, even if it requires breaking with its key ally and joining others in the council in sending a strong message to Israel to stop its construction of new settlements. The Palestinian delegation, along with the council’s Arab member Lebanon, have asked the council’s president this evening to schedule a meeting on Friday. But it remained unclear whether the Palestinian move today is simply a negotiating tactic aimed at extracting a better deal from the United States.

Susan E. Rice, the U.S. ambassador to the United Nations, outlined the new U.S. offer in a closed door meeting on Tuesday with the Arab Group, a bloc of Arab countries from North Africa and the Middle East. In exchange for scuttling the Palestinian resolution, the United States would support the council statement, consider supporting a U.N. Security Council visit to the Middle East, the first since 1979, and commit to supporting strong language criticizing Israel’s settlement policies in a future statement by the Middle East Quartet.

The U.S.-backed draft statement — which was first reported by Al Hurra — was obtained by Turtle Bay. In it, the Security Council “expresses its strong opposition to any unilateral actions by any party, which cannot prejudge the outcome of negotiations and will not be recognized by the international community, and reaffirms, that it does not accept the legitimacy of continued Israeli settlement activity, which is a serious obstacle to the peace process.” The statement also condemns “all forms of violence, including rocket fire from Gaza, and stresses the need for calm and security for both peoples.”

U.S. officials were not available for comment, but two Security Council diplomats confirmed the proposal. The Arab Group was scheduled to meet this afternoon to formulate a formal response to the American offer. Council diplomats said that the discussions were fluid and that there was still the possibility that the U.S. draft would be subject to further negotiations. They said it was also not yet certain that the U.S. offer would satisfy the Arab Group, and that the U.S. may be forced to veto the Palestinian resolution.

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US:‘Silliness’ in tanker debate: Alabama still fighting for jobs

The Star, like most newspapers in Alabama, has closely watched the contest between Boeing and EADS to land the $40 billion-plus contract to build the much-needed and long-overdue fleet of U.S. Air Force tankers.

If EADS wins, Alabama will assemble the planes in a multi-million-dollar facility near Mobile. It will employ thousands. If Boeing wins, that facility and those jobs will go elsewhere.

This is no small matter.

That is why, even though there are analysts who feel EADS’ Airbus is the better plane and will submit the winning bid, Boeing is trying one more time to shift attention from the quality of the product and give itself a competitive advantage.

Because Airbus is a unit of the European Aeronautic Defence and Space Company, Boeing supporters are claiming that awarding the contract to Airbus will favor a company that gets European subsidies and will not give American workers a fair shake. But where do they think workers in Mobile will come from?

So Boeing supporters in Congress have proposed a bill with a catchy (and misleading) name — the “Defense Level Playing Field Act” — that will require the Air Force to factor in the European subsidies in deciding which bid comes in the cheapest.

Much of this controversy revolves around a World Trade Organization decision that ruled Airbus received subsidies it should not have received. However, the WTO also ruled that Boeing got illegal subsidies from the United States, though not for the same plane.

The question is, how much of an advantage would those factors give Boeing?

An analysis of the costs of the Boeing plane and the Airbus plane, even with the alleged subsidies, reveals that the advantage Airbus received was so small as to be insignificant even in the closest competition.

“All it does,” analyst Scott Hamilton told the Mobile Press-Register, is underscore “the entire silliness of the WTO complaints, with respect to the tanker issue.” His conclusion, “who cares?”

Alabama Sen. Richard Shelby, R-Tuscaloosa, described the Boeing strategy as a “Hail Mary pass” — a desperate attempt to turn things around.

More to the point, Sen. Jeff Sessions, R-Mobile, called the Boeing supporters’ bill “inappropriate and unnecessary,” and he indicated that he would put it on hold until there was a full Senate debate. Since most of the Senate is uninterested in the controversy and would just as soon the Air Force settle the matter, Sessions added, “I don’t think it’s going to move.”

This page hopes not.

The Air Force needs a new tanker fleet. Boeing and Airbus should submit their bids and let the Air Force decide.

Read more: Anniston Star – ‘Silliness’ in tanker debate Alabama still fighting for jobs

US Opinion: Rep. Rick Larsen on WTO ruling

Washington, D.C. — Today, U.S. Representative Rick Larsen (WA-02) released the following statement in reaction to reports on the World Trade Organization’s (WTO) ruling on whether Boeing received illegal subsidies to fund aircraft construction.

“Today the WTO handed Airbus a full plate of lemons, and now their spin machine is trying to turn it into lemonade.

“But Airbus can’t hide from the facts: Today’s WTO ruling rejected most of Europe’s claims, finding that Boeing received less than $2.6 billion in illegal aid. The WTO already found the European Union guilty of giving Airbus nearly $20 billion in illegal subsidies. The EU is trying to make a mountain out of today’s molehill of a ruling.

“As the Defense Department moves forward with the tanker competition, it cannot ignore the fact that Airbus has fueled its bid with billions of dollars in illegal subsidies from the European government. A fair, open and transparent competition must take into account the unfair competitive advantage that Airbus tanker received from these massive subsidies.

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WTO Complaint Complicates Chinese-American Cooperation

China’s President Hu Jintao recently ended his 4 day visit to the United States, leaving many questions as to the future of Chinese, American relations over clean energy and climate change mitigation. The U.S. and China have numerous public and private partnerships on energy issues, but a recent complaint to the Word Trade Organization filed by the U.S. Trade Representative (USTR) against China could stall progress.

In September, the United Steelworkers Union (USW) filed a 5,800 page complaint with the US Trade Representative against China. The USW argued that China’s renewable energy policies violated international trade agreements by favoring domestic manufacturers. The USW released a statement saying:

“These practices include discriminatory laws and regulations, technology transfer requirements, restrictions on access to critical materials, and massive subsidies that have caused serious prejudice to U.S. interests. Together, these practices have given Chinese producers an upper hand in accessing investment, technology, raw materials and markets, while foreclosing these same opportunities to U.S.producers.”

The USTR investigated the USW’s claims and in December filed an official complaint with the World Trade Organization against China’s wind power subsidies. The complaint lodged by the USTR specifically refers to China’s “Special Fund for Wind Power Manufacturing.” Under this program grants are available to Chinese manufacturers of wind turbines and manufacturers of parts and components for wind turbines ranging from $6.7 million and $22.5 million. Recipients can receive multiple grants as the size of the wind turbine model increases and the USTR estimates that since 2008 the grants awarded under this program could total several hundred million dollars. The USTR claims this program violates WTO regulations because the grants awarded are dependent upon Chinese wind power equipment manufactures using components made in China as opposed to foreign products.
China’s Commerce Ministry responded by saying:

“All countries are developing new energy sources to deal with the climate changes. China’s measures on wind power development help save energy, reduce emission, and protect environment, which are important measures for sustainable development, and comply with WTO rules. China show grave concern on U.S. request , and will make serious study of it., and deal with the request based on WTO rules, and also reserves her relevant rights.”

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US Launches WTO Dispute Against Chinese Wind Power Fund

The US last month initiated dispute proceedings against China at the WTO, alleging that Beijing’s special fund for wind power manufacturing is an illegal subsidy under international trade law.

Trade tensions between the two countries have heated up in recent months, as Washington’s request for consultations, dated 22 December, represents the second time in less than four months that it has accused China of violating WTO rules. The Obama administration has also been increasingly concerned that US companies risk falling behind their Chinese counterparts in the area of clean energy.

Beijing insists its policies are both within the bounds of WTO rules and good for the environment. The Chinese commerce ministry said in a statement on its website that it “will conscientiously study the US request for consultations, and will deal with this in accordance with WTO dispute settlement rules.”

The US claims the special Chinese government fund awarding grants to wind power makers is illegal under WTO rules because it seems to benefit manufacturers using parts made in China. Washington argues that Beijing’s grants are inconsistent with WTO rules because they appear to award funds based on the use of domestic over imported goods, a violation of Article 3 of the SCM Agreement. The US has also taken issue with China’s failure to notify the WTO of these measures. Moreover, the US alleges China has violated the commitments it made when acceding to the WTO by not making available translations of the domestic legislation regarding the grant program in English, French, or Spanish (the official languages of the WTO).

“Import substitution subsidies are particularly harmful and inherently trade distorting, which is why they are expressly prohibited under WTO rules, said Ron Kirk, the United States trade representative. “These subsidies effectively operate as a barrier to US exports to China. Opening markets by removing barriers to our exports is a core element of the president’s strategy.”

According to Kirk’s office, total subsidies under the Chinese program, which began in 2008, could amount to several hundred million dollars. The case originated in Mr. Kirk’s office in response to complaints by the United Steelworkers Union (USW). The USW complaint included allegations that China employs a wide range of policies to protect its domestic producers of wind and solar energy equipment, advanced lithium batteries and energy-efficient vehicles, among other products. The US trade office, however, has only filed complaints at the WTO with respect to wind power, and has yet to make a determination on the solar power aspects of the union’s complaint.

Requesting consultations is the first step in the Dispute Settlement process at the WTO. If the US and China fail to reach a solution in 60 days, the US can request the creation of a panel to hear the case.

President Obama is expected to raise the issue with China’s President Hu Jintao at a summit meeting in Washington on 19 January.

ICTSD reporting. “Beijing moves to defuse trade row with US over green technology,” THE GUARDIAN, 24 December 2010; “US says China fund breaks rules,” NEW YORK TIMES, 22 December 2010.