Fran O'Sullivan: A game of plant, nudge then smudge

Trade disputes are difficult but the allegation of steel dumping by China is playing out more messily than most.
John Key has gained an assurance from China that there will not be any reprisals if there is an investigation. Photo / Martin Sykes
John Key has gained an assurance from China that there will not be any reprisals if there is an investigation. Photo / Martin Sykes

A well-orchestrated game of "plant, nudge then smudge" has resulted in China's assurance there will be no trade retaliation if an inquiry into alleged Chinese steel dumping proceeds.

The Prime Minister confirmed as much from Indonesia, where he has also set a goal with President Joko Widodo to fast-track two-way trade - partly in response to mounting concerns that New Zealand is overly reliant on China.

"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 or actions taken against New Zealand in the hypothetical case that there was a further investigation, or an investigation into steel issues in New Zealand," Key told reporters.

The assurance came in a meeting between Ambassador Wang Lutong and officials from the Ministry of Foreign Affairs and Trade (Mfat) on Monday.

Key's comments will have the "high level" source who planted the initial story rubbing their hands with a great deal of satisfaction.

There have been conflicting reports. But what does seem certain is:

• Pacific Steel some months ago lodged a complaint over alleged steel dumping by China.

• The Ministry of Business, Innovation and Employment (MBIE) notified China (as it is obliged to do under World Trade Organisation rules).

• Zespri (and possibly other NZ exporters based in China) notified the NZ Embassy in Beijing that they subsequently received a warning about the implications for NZ companies if the investigation went ahead.

• The formal investigation does not yet appear to have commenced.

As I read it, the upshot of the planted story - which has since been nudged along with more disclosures - is that the Chinese Embassy is on the back foot. MBIE's spine will be stiffened. A robust investigation will take place - as it must - to ensure the integrity of our trading system.

Both New Zealand and China will simply have to let the process unfold within the rules-based framework that has been established to handle these difficult issues. And politicians - and their surrogates - on both sides should stay out of the matter until the investigation has happened.

What is unclear is the extent to which China did allegedly exert some pressure on NZ exporters.

Proving that China is dumping steel will not be a simple matter. There is significant over-capacity around the world.

If after an exhaustive investigation the complaint is upheld, anti-dumping measures must be announced to protect the interests of the New Zealand company. The usual measure is an anti-dumping duty - which is a protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value.

Where this affair has been untidy is in the public position-taking by the Prime Minister and the Minister of Trade, Todd McClay.

Frankly, it would be fatuous to believe that either of these Cabinet ministers would have been other than fully across the politics of this issue.

It would appear that confidentiality rules have prevented both men from giving detailed public responses to reporters' questions.

There is an element of convenient "smudge" about this.

If the Government had received reports from officials that other NZ exporters had been approached by Chinese officials, it would have wanted to tease out a formal response first before making direct public comments. Now that there has been a formal assurance from Ambassador Wang that no reprisal will happen if the investigation proceeds, or if anti-dumping measures are ultimately imposed - the veil is being lifted.

What is not clear is the extent to which China did allegedly exert some pressure on NZ exporters to make the steel issue disappear.

McClay has now confirmed that he had been told (while in China for the G20 trade ministers' meeting) that "an industry body" had raised concerns with a New Zealand company about the implication.

The embassy had checked it with MofCom (China's Commerce Ministry) which said it had no knowledge of the matter and had denied it. It was then put down to an unsubstantiated rumour.

Zespri came out yesterday and confirmed it was the company in question.

The kiwifruit exporter has a $500 million business in China.

Any suggestions of "industry consultations related to the import of New Zealand agricultural products" would have greatly concerned it.

Fonterra has yet to publicly say if, or how, it was heavied.

The Government and the NZ exporters will have to take the ambassador's assurances at face value.

Trade disputes are difficult.

But New Zealand must be robust. This one is just playing out more messily than most.

- NZ Herald

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Head of Business for NZME

Fran O'Sullivan has written a weekly column for the Business Herald since its inception in April 1997. In her early journalistic career she was a political journalist in Wellington and subsequently an investigative journalist who broke many major business stories including the first articles that led to the Winebox Inquiry in both NBR and the Sydney Morning Herald. She has specific expertise in relation to China where she has been a frequent visitor since the late 1990s. She is a former Editor of the National Business Review; has twice been awarded Qantas Journalist of the Year and is a multiple winner of the Westpac Financial Journalism Supreme Award.

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