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Russia: Steel Exports Threatened By Anti-Dumping Duties

Cherepovets, Russia; 2 July 1997 (RFE/RL) -- Unlike some heavy enterprises in Russia, the Severstal steel mill has staved off economic collapse by aggressively searching for new markets abroad. But now this enterprise, like dozens of others throughout Russia, is being accused of dumping products in foreign countries at unfairly low prices.

Last month, the U.S. Commerce Department slapped provisional anti-dumping duties of 60 percent on steel plate from Severstal, effectively shutting its exports out of the U.S. market. Canada and Mexico, which launched investigations into Russian steel dumping earlier this year, are expected to follow suit soon.

The company's management fears that these cases could threaten their export markets, a prospect which could have dire consequences for the town's 300,000 inhabitants who rely on the mill's meager but steady salaries.

Severstal is not alone. Russia is currently facing 46 anti-dumping cases, mainly against various forms of metal and chemical products. The Russian Trade Ministry has estimated that the economy loses $1 billion annually due to anti-dumping duties.

Alexei Ruzhin, who heads the Trade Ministry's division on dispute settlement, says there has been what he called a "surge" in anti-dumping cases against Russia over the last couple of years. He said foreign countries were following protectionist trade policies.

Dumping by definition is selling production below cost or below that charged in the domestic market as a predatory means of gaining market share. In most cases, local industry lodges an anti-dumping complaint against a foreign country through its own government. The government, in turn, examines production costs in the foreign market to determine whether dumping has occurred.

But, much to the dismay of senior officials here, Russia is treated differently. Most countries consider Russia a non-market economy, which means that investigations into dumping are based not on local costs and prices, but on similar "surrogate" countries. In the case of Severstal, the U.S. Commerce Department used Brazilian costs to determine the dumping margins, a practice which Russian officials call unfair.

Ruzhin says the end result is that it is easy to bring a dumping complaint against Russia. Moreover, he says, the anti-dumping duties against Russia are artificially high, closing the door on foreign markets.

The sense that Russia is being unfairly targeted in these anti-dumping cases has reached the highest echelons of the Russian government. Both Prime Minister Viktor Chernomyrdin and First Deputy Prime Minister Anatoly Chubais complained publicly during their recent trips to the United States that the West was practicing discriminatory trade policies towards Russia.

First Deputy Prime Minister Boris Nemtsov took the boldest step in the war of words over trade, refusing to meet with the European Union's top trade official Sir Leon Brittan during his visit to Moscow last month. Nemtsov sharply criticized a recent EU decision to slap provisional anti-dumping duties on Russian iron and steel pipes and charged that Brittan had demonstrated his unwillingness to compromise on trade policies during his meetings with other Russian officials.

Altogether the EU has anti-dumping duties against 14 Russian products. But Brittan argued that the anti-dumping duties affect only 1 percent of Russian exports to the EU and called the Russian balance of trade "extremely good."

The anti-dumping cases have provoked the ire of senior Russian politicians not only because defending domestic industry makes for good politics at home, but because exports have been one of the few bright spots in Russia's flagging economy.

With the collapse of domestic demand, coupled with the payments crisis, many enterprises have turned to exports to stay on their feet. Russian exports, which totaled $87 billion last year, have grown by 50 percent since economic reforms began.

Many Russian officials have said that U.S. and EU trade policies, reflected in their anti-dumping rules, flies in the face of their stated aims of encouraging economic reforms. Chernomyrdin has suggested that the West should stop providing technical assistance and instead give Russia better access to their markets.

Russian trade officials complain that many countries copy the U.S. and the EU on dumping cases, filing charges against the same products that Washington and Brussels have decided to investigate. As Ruzhin put it: "Everyone looks to the U.S."

U.S. dominance in dumping investigations has made the case against Severstal a high-profile one, with many predicting other countries will follow Washington's lead.

Severstal's general director, Alexei Mordashov, says the U.S. case alone may not have a huge impact. "But this could potentially mean the beginning of a whole wave of new anti-dumping cases. It could set a precedent."