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Russian steelmakers say that an anti-dumping investigation now underway in South Africa is unfair to the Russian steel industry, and should be modified by the granting of full market economy status to Russia when the two governments’ trade officials meet in Pretoria next month.

The South Africans have responded by branding Russian tariff penalties on South African fruit imports as equally unfair. What ought to be a straightforward quid pro quo, however, has been dragging on now for several years. If a deal on steel-for-fruit can’t be reached by the end of November, Russia’s ability to strike a far more complex set of bargains over a much wider range of goods with the World Trade Organization must be in doubt.

The South African Department of Industry and Trade imposed temporary anti-dumping duties on imported Russian cold-rolled steel sheets in April of this year. A 15.1 percent penalty was imposed on Severstal, one of Russia’s largest steelmakers, and 77.7 percent on other Russian sources of the same type of steel. The investigation began in June 2001 and the penalty expires on October 18; a final ruling by Pretoria should follow. A Russian Foreign Ministry negotiator is expected to arrive in Pretoria shortly, in time to prepare for full-scale negotiations between South African Industry and Trade Minister Alec Erwin and Russia’s Deputy Prime Minister Valentina Matviyenko between Nov. 18-22.

Andrei Shikhanovich, head of the export department of Severstal, told me that in their investigation of the price of Russian cold-rolled steel, South African investigators judged Russia to have non-market prices for coal, electric energy and iron ore, thus constituting a subsidy to exports and enabling them to be sold at dumping prices in South Africa.

“While we understand that this may be true to some extent for electric energy tariffs,” Shikhanovich said, “we will try to prove that coal and ore prices in Russia are market prices, because Severstal buys these raw materials on the open market at free market prices.”

According to estimates by Severstal, Russian exports of cold-rolled sheets to South Africa could reach 30,000 metric tons per year, “if the investigation provides a positive outcome for Russian producers.” There were no sales of this type of steel to South Africa last year because of the uncertainty surrounding the anti-dumping investigation.

According to Vladimir Pechik, an analyst at the Russia Union of Metal Products Exporters, South Africa first introduced anti-dumping duties of 81.7 percent on Russian hot-rolled steel in 1998. Before then, Russian shipments to South Africa totaled 58,200 tons in 1997, dropping to 17,400 tons in 1998, and zero in 1999. In 1999, Russian steel mills also sold 27,600 tons of cold-rolled sheets, a figure that jumped to 44,200 tons in the year 2000. A small volume of rods, bars and pipes was also shipped that year. According to Russian Customs data, the total value of these exports to South Africa was $15.9 million – about half the total Russian exports to South Africa for the same period.

Once the anti-dumping action got under way in Pretoria last year, the steel trade dwindled; just 7,600 tons of steel products were shipped to South Africa.

Shikhanovich said that Severstal “first wants to see the results of the investigation into cold-rolled steel, and whether the South African authorities will grant market status to the Russian economy in November.”

Only after that, he added, “will it be possible to say whether it makes sense for Severstal to initiate reconsideration of the earlier anti-dumping investigation of hot-rolled sheets.”

Sources at the Ministry of Economic Development and Trade in Moscow confirm that the government has officially asked South Africa to grant Moscow to change its trading classification from non-market to market status. According to Russian sources, when Pretoria analyzes anti-dumping complaints against Russian imports its treatment of Russia as a non-market economy allows calculations of production costs that discriminate against Russian imports in the South African market.

Russian pressure on Pretoria to grant market economy status follows the U.S. decision to do this several weeks ago; and a European Union promise to grant Russia market economy status before the end of this year.

South African officials have replied by telling the Russian government that the United States, the European Union, and Japan all grant South Africa developing country status, which Russia has refused to do. Erwin’s ministry is demanding that Russia reclassify South Africa, and thereby eliminate a tariff advantage that South African rival Chile currently enjoys in selling fruit to Russia.

At present, South African officials have told Russian officials that the Russian government is imposing the full 10 percent tariff on imports of South African fruit, while giving preference to competing imports from Chile.

The reason, a source told me, is that Russia classifies South Africa as a developed country, and Chile as a developing country. The difference in classification gives Chilean fruit a 25 percent tariff reduction compared to South African fruit.

According to Russian Customs data, last year South African fruit sales to Russia totaled $25.2 million; that was more than double the total for 2000. The figure was also one-third of the total value of all South African exports to Russia for the year.

Industry sources believe that the South African fruit trade is heading for the $40 million figure this year, with citrus fruit and grapes mainly traded.

Russian trade figures for the first five months of this year show that the overall South Africa-Russia trade turnover jumped to $60 million; that is double the figure for the same period of last year. Almost all of this growth came from Russian exports to South Africa.

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