China to impose duties on US chicken

By Geoff Dyer in Beijing

Published: February 5 2010 04:28 | Last updated: February 5 2010 10:28

China will impose anti-dumping duties of up to 105.4 per cent on imports of poultry products from the US, opening a new rift between the two countries at the end of a week in which frictions between the US and China have escalated considerably.

China’s Commerce Ministry said on Friday it had decided to impose the heavy duties after an investigation into allegations of dumping made by local poultry producers. In recent years, American companies had developed a profitable business exporting to China chicken feet that were almost worthless in the US.

The new trade dispute came as it appeared likely President Barack Obama would meet with the Dalai Lama later this month.

The White House has yet to confirm the date for any meeting but the Tibetan religious leader’s office said that he would be in Washington DC on February 17-18.

Earlier in the week, a senior Chinese official said that a meeting with the Dalai Lama was not in the interests of the US at a time when it was trying to recover from the financial crisis.

”If the US leader chooses this period to meet the Dalai Lama, that would damage trust and cooperation between our two countries, and how would that help the United States surmount the current economic crisis?” said Zhu Weiqun, a vice minister at the Communist Party’s United Front Work Department, the body which handles Beijing’s contacts with the Dalai Lama.

China also this week threatened to impose sanctions on four US companies for participating in a planned $6.4bn arms deal with Taiwan that the Obama administration has approved. The companies included Boeing, which has been at the centre of US-China relations for the last 30 years.

Meanwhile, Mr Obama appeared to step up the pressure on China over its currency on Wednesday when he told Senate Democrats that the issue of currency rates needed to be addressed internationally ”to make sure our goods are not artificially inflated in price and their goods are artificially deflated in price”.

In a statement on its website, China’s Commerce Ministry said that US poultry importers had caused “material damage” to local companies. Chicken feet and wings sell for around 2 cents per pound in the US, however they can fetch twenty times that amount in China where feet in particular are considered a delicacy. Chinese producers alleged, however, that the amount US companies were charging only just covered freight costs. The duties, which will begin on February 12, range from 43.1 per cent to 105.4 per cent.

The tariffs came a day after China requested a World Trade Organisation investigation into European Union duties on imports of shoes from China.

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• FEBRUARY 5, 2010, 8:58 A.M. ET

China to Tax U.S. Chicken

By J.R. WU

BEIJING—In a clear sign that China is getting increasingly bold in its response to an ongoing trade dispute with the U.S., Chinese authorities Friday slapped preliminary import duties of as much as 105.4% on U.S. chicken products.

The Ministry of Commerce which announced the decision said U.S dumping is hurting China's domestic poultry industry. Once the new directive takes effect Feb. 13, U.S. exporters, including Pilgrim's Pride Corp. and Tyson Foods Inc., will be required to deposit the duty with Chinese customs, pending a final decision on the matter.

The ministry listed 35 companies, most of which will have to pay a duty of 64.5%. Pilgrim's Pride will have to pay the highest duty among named companies, of 80.5%, while Tyson Foods will pay the least, at 43.1%. All other U.S. firms not named in the list will pay 105.4%, the ministry said. The affected companies have 20 days to appeal the decision.

While China imports less than $800 million worth of U.S chicken products a year -- just a small portion of the total $77 billion in products imported from the U.S. and $1.01 trillion in overall imports last year—the move suggests Beijing has become more forceful in responding to trade disputes as governments around the world seek to revive their economies, sidelining earlier pledges to avoid protectionist measures.

China initially targeted U.S. chicken products last year after the Obama administration imposed duties on Chinese-made low-end tires in September, escalating the trade tension between the two countries. Friday's decision was announced after a five-month investigation on alleged dumping by U.S exporters.

While both countries have been targeting less significant items such as tires and poultry products, the real irritant appears to be the yuan, which the U.S claims has been kept artificially undervalued, giving Chinese companies a leg up in selling their goods in the international market. China has so far resisted foreign calls to revalue the yuan, saying foreign countries should instead combat protectionism, which hurts Chinese exports.

Finance ministers of the G7, which doesn't include China, will meet in Canada this weekend and likely will discuss currency-related issues. Earlier this week, President Barack Obama said the U.S. would get "much tougher about enforcement" of trade rules in dealing with China. Those comments have escalated the war of words between the two powers.

The state-controlled China Daily Friday said the country "won't fold" on the yuan. The English-language newspaper usually targets a foreign audience and the report's display on the front page appears to reinforce the message that Beijing won't entertain outside pressure on the sensitive currency issue.

China's move to slap a punitive tax on chicken products from the U.S, its second-biggest trading partner, came just a day after China took its biggest trading partner, the European Union, to the World Trade Organization regarding EU levies on Chinese-made shoes.

The latest move is unlikely to result in any shortage of poultry products in the domestic market. Helen Huang from commodities consultancy firm Shanghai JCI estimated that China's annual poultry production is between 14 million to 15 million tons, and while the U.S. is the top exporter to China of poultry, accumulated poultry imports from the U.S. during 2004-2008 totaled around 4 million tons.

—-Zheng Xiaolu and Liu Li contributed to this article.

Write to J.R. Wu at jr.wu@dowjones.com