By Scott Patterson and William Mauldin
The Obama administration is expected to launch a formal
complaint Thursday against the Chinese government with the World
Trade Organization over subsidies it says Beijing provides to the
country's vast aluminum industry, according to people familiar with
the matter.
The complaint would represent an escalation of trade disputes
between countries with the world's two largest economies almost a
week before Donald Trump assumes the U.S. presidency. Mr. Trump
suggested again Wednesday in a news conference that trade relations
with Beijing would be a top priority, saying the U.S. trade
imbalance with China was too large.
The complaint accuses China of funneling artificially cheap
loans from state-run banks to Chinese aluminum producers, helping
the companies upgrade their facilities and expand production, the
people said. China also subsidizes aluminum production by providing
producers with cut-rate coal and electricity, the complaint says,
according to people familiar with it.
The office of U.S. Trade Representative Mike Froman, which is
filing the case with the WTO, declined to comment. A spokesman for
the Chinese embassy in Washington didn't immediately respond to a
request for comment.
"When China drives down aluminum costs by cheating, Ohio workers
and manufacturers pay the price," said Sen. Sherrod Brown (D.,
Ohio). "Thousands have lost jobs because of unfairly subsidized
aluminum from China that has flooded the market and led to
overcapacity, and it's past time we get tough on these violations
before more American workers suffer."
Chinese aluminum imports have come under the spotlight in the
past year as U.S. authorities probed allegations that China
Zhongwang Holdings Inc., a big Chinese aluminum producer, evaded
trade sanctions imposed on the company in 2010. The Commerce
Department late last year determined certain China Zhongwang
exports to the U.S. had been designed to skirt the sanctions. China
Zhongwang says it no longer sells the products in the U.S.
The Wall Street Journal reported in October that the Department
of Homeland Security has launched a probe into whether U.S.
companies linked to China Zhongwang's founder and chairman, Liu
Zhongtian, illegally avoided punitive import tariffs on aluminum.
The Journal's articles traced Mr. Liu's connections to a large
stockpile of aluminum in Mexico that represented 6% of global
inventories and has since been shipped to Vietnam.
China Zhongwang has denied wrongdoing.
U.S. producers say a boom in Chinese production has depressed
prices world-wide and harmed their ability to compete. By the end
of 2016, only five aluminum smelters were operating in the U.S.,
down from 23 in 2000. Alcoa Corp., the largest American aluminum
maker, last year split in two, isolating its profitable
parts-making units from its troubled raw-aluminum operations.
Chinese aluminum production has surged in recent years,
accounting for 55% of global output in 2015, up from 24% a decade
ago, according to the U.S. Geological Survey. The U.S. accounted
for 2.7% of global production in 2015, according to the USGS.
The allegations in the WTO company could heighten tensions
between the U.S. and China. Mr. Trump in December announced the
creation of a new National Trade Council inside the White House to
facilitate industrial policy and tapped as its leader a fierce
skeptic of China's trade policies, Peter Navarro, a University of
California, Irvine, professor.
During the presidential campaign, Mr. Navarro worked with New
York financier Wilbur Ross Jr., Mr. Trump's pick for commerce
secretary who has lobbied for a more aggressive posture toward U.S.
trade partners.
Mr. Trump's pick for trade representative, Robert Lighthizer,
has made a career arguing for trade barriers when partner countries
break the rules. Mr. Lighthizer could put greater emphasis on
import tariffs, especially in the metals sector, and even at the
risk of retaliation from China or running afoul of the WTO, trade
lawyers say.
The complaint by the Obama administration, following a review by
the WTO, could ultimately result in higher U.S. tariffs on Chinese
exports of aluminum and other products.
The trade-enforcement action would be the 16th filed by
President Barack Obama against China with the WTO. Other complaints
include allegations that export duties for copper and other
commodities to make the minerals cheaper in China than outside the
country and promote domestic manufacturing.
The administration's complaint is based in part on more than a
year's worth of research by a team of U.S. industry-funded
investigators who collected reams of data and information inside
China, people familiar with the investigation said.
In October, eight U.S. senators asked Mr. Froman to take action
against China over what they said were unfair subsidies to the
Chinese aluminum industry. The senators, including Sens. Brown, Rob
Portman (R., Ohio), Charles Schumer (D., N.Y.) and Debbie Stabenow
(D., Mich.), asked Mr. Froman to take action against China at the
WTO "before U.S. manufacturers and their workers incur further
irreparable harm." Other signatories include Sens. Kirsten
Gillibrand (D., N.Y.), Bob Casey (D., Pa.), Jeff Merkley (D., Ore.)
and Ron Wyden (D., Ore.).
Write to Scott Patterson at scott.patterson@wsj.com and William
Mauldin at william.mauldin@wsj.com
(END) Dow Jones Newswires
January 11, 2017 19:47 ET (00:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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