State-Owned Companies at Center of US, Chinese WTO Steel Case

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The World Trade Organization has struck a blow to US efforts to challenge the role in global commerce of state-owned companies in emerging economies after ruling against Washington in a dispute over the punitive tariffs it imposed on steel and other imports from China and India. The US argued before the WTO that Chinese state-owned steel companies, particularly,  benefit from both overt and hidden subsidies that unfairly lower their costs of production.

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A panel of WTO judges ruled against the US in cases brought by China and India that disputed the way Washington imposed countervailing duties against alleged illegal subsidies by “public bodies.”

“The Administration is committed to the strong enforcement of U.S. countervailing duty laws in order to respond to unfair subsidies, and to a strong defense of those duties when challenged by any U.S. trading partner,” said US Trade Representative Michael Froman.

The three-judge panel reaffirmed a 2011 judgment that set a narrow definition for what could be considered a government entity. According to this ruling, state-owned companies could not be simply considered “public bodies” because they were majority-owned by governments. Instead, the panel said, the US had to prove that Chinese state-owned enterprises also performed “government functions” or exercised “government authority.”

An appeal is expected.

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Chinese steel prices closed flat for the day. The price of iron ore 58% fines from India hit a high price of CNY 840.00 ($135.36) and a low price of CNY 830.00 ($133.74) per dry metric ton. Chinese HRC stayed flat at around CNY 3,380 ($544.65) per metric ton. The price of Chinese coking coal saw little movement at CNY 1,390 ($223.98) per metric ton.

The steel billet cash price held steady on the LME at $395.00 per metric ton. The steel billet 3-month price was unchanged on the LME at $400.00 per metric ton.

The US HRC futures contract 3-month price showed little movement yesterday, hovering around $639.00 per short ton. The US HRC futures contract spot price saw little movement on Tuesday at $670.00 per short ton.

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