Steel boot on the other foot

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For the first time, Vietnam is banking on WTO rules to protect an already unwieldy steel industry from uncontrolled steel imports

Steel bars piled up at a construction site in downtown Ho Chi Minh City. Local steel manufacturers have claimed they are suffering losses due to strong competition from imported steel with "dumping prices."

For long at the receiving end of machinations by other markets seeking to restrict Vietnamese imports, be it seafood or leather uppers, Vietnam is now hoping that it can use WTO regulations to similar effect.

The domestic steel industry is looking for its second victory of sorts after lobbying for new rules on steel imports in what would be the first remedial measures to be applied in Vietnam after the country joined the World Trade Organization in 2007.

The rulings will use "technical items" to prevent steel imports that are hurting the local industry.

Leading steel firms including Korea-based Posco and the Phu My Flat Steel Company (PFS) are consulting with the Ministry of Science and Technology to set up quality criteria on the basis of international standards for steel production and distribution throughout Vietnam.

The rules are expected to apply in the first quarter of next year.

The first victory obtained by the domestic steel industry to contain the import rush was an automatic import licensing decision issued by the Ministry of Industry and Trade early last month asking importers to register imports made from July 5 to December 31, 2010.

Automatic import licensing defined by WTO is not to be administered in such a way as to have restrictive effects on imports but to collect statistical and other factual information on the imports.

Tran Quang, PFS deputy director, said the Vietnamese steel industry has been struggling with excessive production as well as increasing imports with which growth in local demand was not keeping pace.

Remedial measures allowed by WTO are needed for Vietnam to protect its domestic steel industry and ease the burden on national deficit, said Quang.

He said Vietnam at present has no requirements for steel imports, and this has led to a rush in imports, mainly from the Asian region, of products that do not meet quality standards and can undermine, in turn, the quality of structures where such imports are used.

A report by the Vietnam Steel Association last month said imports of steel wire rods in the first six months of 2010 increased by 124 percent year-on-year to nearly 220,000 tons.

"We hope the remedial measure, if effective, will exclude disqualified products from imports," he said, adding such products crossing Vietnamese borders accounted for 30-40 percent of the country's total steel imports every year.

Le Phuoc Vu, chairman of the Hoa Sen Group, said many steel businesses were suffering losses due to strong competition from imported steel with "dumping prices".

Tran Huu Huynh, head of the Vietnam Chamber of Commerce and Industry's legal department, said it was not difficult to recognize unfair practices by importers in the Vietnamese market.

Remedial measures should be applied on imports to protect domestic producers, said Huynh, who added the measures allowed by WTO were antidumping or countervailing taxes against products sold at unfairly low prices or subsidized by governments and safeguards. The measures were designed to temporarily limit imports, he added.

Local businesses have complained most about unfair practices relating to imports of goods like steel and food imported from China and Southeast Asian countries.

According to them, steel imported from China was sold at low prices as the products were subsidized by the Chinese government through its policy to exempt value added tax for steel exports.

No legal experience

"You can see Chinese goods everywhere in Vietnam", said special counsel to US law firm Baker McKenzie, James Lockett, in a seminar in Ho Chi Minh City last week.

Lockett said local businesses should gather in a group, not as individuals, and follow regulated procedures to file against imports that they thought used unfair practices and threatened their production.

Huynh said local businesses complained about unfair practices but had no legal experience to take action against the offending parties even in their home market.

He said they were focusing on lawsuits in export markets while they should actually be paying attention to taking legal action in the domestic market, adding that for doing this, they needed support from the regulatory authorities in the country.

Vu Ba Phu, deputy head of the Vietnam Competition Authority, said imports were not challenging local businesses but increasing the burden on national deficit.

Phu said remedial measures were a solution that the Ministry of Industry and Trade can apply to prevent the growing trade deficit.

Vietnamese regulatory authorities have yet to apply any remedial measure on imports even after local firms have filed a lawsuit asking for such action, as happened with two local float glass (used in modern windows, made by floating molten glass on a bed of molten metal like tin) firms last year.

The firms claimed the quantity of float glass imported mainly from Asia had soared in 2006, 2007 and 2008, making them suffer huge losses and one factory to shut down. They asked for the imposition of additional taxes on the imports as a remedial measure.

However, the Vietnam Competition Authority denied the claim and rejected the lawsuit, saying in its ruling that the global economic downturn and weak management of investment by the two applicants were the main reasons for the losses.

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