Commentary on Political Economy

Monday 18 March 2024

 Brazil opens China anti-dumping probes

Industry ministry acts after businesses raise concerns over cheap imported goods

BRYAN HARRIS — SÃO PAULO JOE LEAHY — BEIJING ANANTHA LAKSHMI — JAKARTA Additional reporting by Christine Murray, Ciara Nugent and Joe Daniels · Mar 18, 2024

Brazil’s industry ministry has launched investigations into the alleged dumping of industrial products by China as Latin America’s largest economy reels from a wave of cheap imported goods from the Asian nation.

At the request of industry bodies, the ministry has in the past six months opened at least half a dozen inquiries into products ranging from metal sheets and pre-painted steel to chemicals and tyres.

The Brazilian measures come at a time when countries are bracing for a flood of exports from China as the world’s second-largest economy struggles with excess capacity amid a property sector slowdown and weak domestic demand.

To stimulate its economy, China is investing in advanced manufacturing, especially in solar energy, electric vehicles and batteries. In addition to Brazil, China’s steel exports to Vietnam, Thailand, Malaysia and Indonesia have risen sharply in recent months.

Developed markets have started taking extensive measures against imports from China, with the EU launching an anti-subsidy investigation into Chinese EVs and the Biden administration recently raising security concerns over the Asian country’s vehicles.

China’s exports grew 7.1 per cent in the first two months of this year, far outpacing growth in imports. “Prolonged declines in China’s export prices may cause trade tensions between China and some major economic powers to rise,” analysts at Nomura said in a research note on Friday.

China’s exports to and imports from Brazil both rose by more than a third in the first two months of the year, according to Chinese customs data.

“Last year saw one of the most critical situations in the entire history of the national chemical industry,” said André Passos Cordeiro, president of the Brazilian chemical industry association.

“We see temporary increases in import tariffs as an indispensable regulatory tool for combating these predatory operations and preserving the domestic market.”

The trade tensions create a dilemma for leftwing President Luiz Inácio Lula da Silva, who has sought to nurture relations with Beijing while protecting and developing Brazil’s national industries.

Since returning to the presidency for a third non-consecutive term last year, Lula has put industrial policy at the heart of his economic strategy.

But Brasília is also likely to try to avoid a confrontation with Beijing, which is its largest trading partner and significant purchaser of commodities such as soyabeans and iron ore. Last year, Brazil exported more than $104bn worth of goods to China, while importing $53bn.

Of the 101mn tonnes of soyabeans shipped from Brazil last year, 70 per cent, worth about $39bn, went to China.

One of the most recent investigations was launched this month following a request by CSN, a large Brazilian steel producer, which alleged that between July 2022 and June last year imports of particular types of carbon steel sheets from China rose almost 85 per cent.

In opening the inquiry, which is scheduled to take 18 months, the industry ministry said that there were “sufficient elements that indicate the practice of dumping in exports from China to Brazil . . . and damage to the domestic industry resulting from such practice”.

Brazilian steelmakers have requested the government slap tariffs of between 9.6 per cent and 25 per cent on imported steel products. Overall imports of steel and iron from China rose from $1.6bn in 2014 to $2.7bn last year.

Soaring steel imports are a particular sore spot for the Brazilian government as the Latin American nation is one of the world’s largest exporters of iron ore — a primary ingredient in steel production.

Chemicals and tyres are also points of contention, with the industry ministry launching separate investigations in recent months. According to official data, imports from China of the chemical phthalic anhydride rose more than 2,000 per cent in volume terms between July 2018 and last June.

In the same period, imports of tyres grew more than 100 per cent to 47mn units from 23mn units, with roughly 80 per cent coming from China.

Brazil is not the only emerging market to voice concerns about the surge in industrial products from China. In Thailand, the government has accused Chinese companies of evading antidumping duties, while industry groups have warned of big losses from cheaper steel in the market.

In Vietnam, the government has launched investigations into dumping of wind towers and some steel products from China after complaints from the local industries.

In August last year Mexico imposed tariffs of 5-25 per cent on imports of hundreds of goods from countries with which it does not have a free trade agreement, with China being one of the countries most affected.

The tariffs were put in place amid increasing pressure from US officials, who have suggested that Mexico is not doing enough to clarify the origins of steel imports from third countries, in what trade experts say is a reference to China.

The Chinese government did not immediately respond to a request for comment. It has consistently attacked what it calls “protectionism”, particularly by the US and the EU.

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