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Thread: imported Chinese products are about to become MUCH more expensive ...

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    Default imported Chinese products are about to become MUCH more expensive ...

    (snip)"By Don Lee, Los Angeles Times Staff Writer
    June 20, 2008
    SHANGHAI -- China said Thursday that it would raise fuel and electricity prices, a move that could add to the nation's already high inflation rate but cut consumer demand and thus help lower global crude oil prices.

    China, which has been keeping fuel costs for consumers below market rates with billions of dollars in subsidies, said retail gasoline prices as of today would rise more than 16% and diesel prices would jump 18%. Many analysts have criticized the subsidies, saying they distorted the market and discouraged consumers and industries from conserving energy.

    The announcement, made through the official New China News Agency, appeared to have an immediate effect in global markets, as crude prices for July delivery fell $4.75, or 3.5%, to settle at $131.93 a barrel in New York futures trading.

    "It caught the market by surprise because most people didn't think that China would do anything about their subsidies until after the Olympics," said Phil Flynn, an analyst at Alaron Trading in Chicago. "What makes it even more amazing is the market was up because of events in Nigeria. . . . When the China thing came out, that definitely took a back seat."

    Early in the day, the price of oil was ticking higher on fears over production in Nigeria, where an attack from militants forced Royal Dutch Shell to shut down production at an offshore rig, Flynn said. Sabotage of oil operations has become common in Nigeria. But this assault was unusual because the target was more than 75 miles offshore.

    China is the world's second-largest consumer of oil, well behind the United States, but the Asian nation's demand and imports of crude have been growing briskly in recent years to support its booming economy and the rising standard of living among its 1.3 billion people. Analysts have said burgeoning consumption in China, India and other developing countries has contributed to the doubling of oil prices in the last 12 months.

    The increase in China's retail pump prices -- to about $3.05 per gallon for gas and $3.31 for diesel -- is expected to reduce consumption.

    "Once they start paying for it, they'll slow down" their fuel use, said Fadel Gheit, oil analyst at Oppenheimer & Co.

    He said nearly 60% of the world's oil demand growth stemmed from China's subsidized consumption. Cutting price protections there, he said, means "demand will come down very sharply."

    That could let some air out of the frenzied oil market.

    "I think this ride is about to end," Gheit said of the feverish rise in prices. "Everybody who is paying the true price of oil is using less . . . and the demand outlook has been weakening over the last six months."

    China last raised retail fuel prices in November, by about 9%, and analysts and consumers had expected the government to lift prices again. Most people thought the increase would come after the Beijing Olympics in August because the government might not want to risk upsetting the populace by adding to higher consumer prices.

    "It will definitely push up inflation, but the government had to adjust it because it faced too much pressure," said He Jun, an oil analyst at Beijing Anbound Consulting Co. "The demand-and-supply system was too distorted."

    Although China's refined oil prices have been low, the market faced a supply crunch because people were hoarding fuel in anticipation of a price hike. That was exacerbated by a reluctance among the big state-owned oil companies to sell at huge losses because they had to buy oil at global market rates but sell fuel to consumers at artificially low prices.

    China's top two oil companies, which produce and refine oil, have sustained heavy losses, contributing to recent declines in China's plummeting stock market.

    Mei Xinyu, a researcher with China's Ministry of Commerce, said distorted prices encouraged people to waste fuel. Even though sport utility vehicle sales in Western countries have been falling sharply, he said, they have continued to rise in China. More than half of the imported vehicles in the first quarter were SUVs, he said.

    "There's still a long way to go up," he said of China's retail fuel prices. "But this shows the future trend."

    Mei noted that the move to raise prices followed news that China's year-over-year inflation rate edged down to 7.7% in May from 8.5% in April. He also noted that Beijing's action came a day after the U.S. and China concluded economic talks outside Washington, suggesting that Chinese officials may have been responding to calls from the U.S. to expose more of their economy to market forces.

    Chinese consumers and businesses have been bracing for the higher pump prices.

    "It's quite big," said Sun Aihuai, manager of Hongjian Logistics Co. in Dongguan in China's industrial southeast. Sun, who operates two 2-ton trucks, said he would probably raise his prices.

    Still, he said that the fuel price increase was "acceptable," given that he recently has been forced to wait as long as two hours to fill up at jammed service stations. Sometimes, he said, he had little choice but to buy diesel on the black market at prices 30% above retail levels."(snip)


    Obviously, the fact that the Chinese gov't has been forced to lift it's gov't subsidized 'below world market' domestic prices for gasoline / diesel / electricity etc. will have an impact on the Chinese. However, it will also have a BIG impact on the price of Chinese products which are exported. In one sense this will be a 'good' thing, since it decreases the cost differential between production in the USA and the same production in China thus providing less motivation for US companies to outsource / relocate. On the other hand it will raise prices for Chinese goods on American store shelves, creating yet more inflationary pressure and yet more financial stress on 'lower income' Americans who typically purchase Chinese products based on lowest price available.

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    Default Re: imported Chinese products are about to become MUCH more expensive ...

    and in another 'arena' the first 'protectionist' victory by US manufacturers and unions has just emerged from the courts ...



    (snip)"WASHINGTON (June 20) - U.S. steel pipe manufacturers, who have been battling a surge in imports from China, won a major victory Friday when the International Trade Commission cleared the way for the imposition of stiff penalty tariffs for the next five years.

    The commission voted 5-0 that the U.S. industry was being harmed by the import of circular steel pipe. The decision marked the first time a U.S. industry has won a decision to impose tariffs on a Chinese product based on the argument that the Chinese government was unfairly subsidizing a Chinese industry.

    The ruling means penalty tariffs ranging from 99 percent to 701 percent will be imposed on Chinese imports of circular welded pipe, a form of pipe used in a variety of construction jobs, such as home plumbing and sprinkler systems.

    For more than two decades, the U.S. government had refused to consider subsidy cases against the Chinese government because China was classified as a non-market economy.

    However, the Bush administration, facing increasing anger over soaring trade deficits with China, reversed course last year and announced it would treat China in the same way as other countries in disputes involving government subsidies.

    The pipe case is the first to clear all the government hurdles for the tariffs to go into effect. Last year, the Commerce Department imposed penalty tariffs on imports of Chinese glossy paper, but the trade body blocked the tariffs by ruling that the domestic industry had not proven it was being materially harmed by the imports.

    In the pipe case, the Commerce Department found the Chinese government was providing unfair subsidies. It also found that the pipe was being sold in this country below the cost of production, a practice known as dumping. The penalty tariffs for the government subsidies, known as countervailing duties, and the antidumping tariffs were upheld by the trade commission vote.

    Chinese exports of circular pipe have exploded since 2002, rising from 10,000 tons that year to 750,000 tons in 2007. The U.S. industry said the increase in imports had resulted in the loss of 500 pipe worker jobs, representing about one-quarter of the work force.

    Plants making circular welded pipe, also known as standard pipe, are located in 13 states - Alabama, Arizona, Arkansas, California, Illinois, Iowa, Kansas, Missouri, Ohio, Pennsylvania, Tennessee, Texas and Wisconsin.

    The case before the government was filed by six pipe producers and the United Steelworkers union, whose president, Leo Gerard, called the commission ruling a major victory that should send a clear message to China and to politicians in this country.

    "China is a trade cheat," Gerard said in a conference call with reporters. "They undermine the market, depress prices and destroy jobs."

    Gil Kaplan, a lawyer representing the pipe companies, predicted the ruling could be the first of a wave of victories by U.S. companies battling Chinese imports.

    "This decision marks a fundamental turning point in the U.S.-China trade relationship," Kaplan said. "The subsidies that the Chinese are giving a whole host of their manufacturing industries are a big reason the U.S. trade deficit has been growing so rapidly. This is the first time the United States is standing up and saying we are not going to put up with this and we will impose duties to offset the subsidies.""(snip)


    So now US industries / governments / individuals have a choice of paying twice as high a price for welded steel pipe made in America, or twice as high a price due to the new tariffs / duties imposed on top of the original price of welded steel pipe imported from China. So yes some highly paid US union jobs will be preserved, as will the financial future of some US pipe manufacturers. But in exchange every project requiring welded steel pipe will become that much more expensive (resulting in higher taxes to fund public projects, and higher prices to fund private sector projects).

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    Default Re: imported Chinese products are about to become MUCH more expensive ...

    Nice. A free trader becoming a fair trader.

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