Manawatu dairy farmer Andrew Hoggard says struggling farmers can't take another hit from a trade war with China.

China has threatened "retaliatory measures" against New Zealand trade, warning it will slow the flow of dairy, wool and kiwifruit imports.

The world's biggest trading nation is angry at New Zealand inquiries into a glut of Chinese steel imports flooding the market; the Chinese believe New Zealand is part of a US-led alliance to target Chinese national interests.

The behind-the-scenes threat comes just days before the arrival of US Vice President Joe Biden in New Zealand, forcing government and commerce officials to scramble to open urgent talks with China. New Zealand is angry that China should take such a combative approach, and is asking that it desist.

DAVID UNWIN/FAIRFAX NZ. Manawatu dairy farmer Andrew Hoggard fears the impact of a vengeful China - but says New Zealand must stand up for its free trade principles. "The rules are the rules."

Pacific Steel, the sister company of iron miner and processor NZ Steel, has lodged a confidential application, under local and World Trade Organisation rules, for an investigation into China dumping cut-price steel on the New Zealand market. The local industry is struggling to compete with the glut of sometimes substandard Chinese metal, which is being used in major projects like the $1.4 billion Waterview Connection and bridges on the Waikato Expressway.

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* Charles Finny: Is cheap Chinese steel harming Kiwi manufacturers?

* NZ reaction to South China Sea ruling treads gently over China's loss

* John Key's tip-toeing between trade and defence as Beijing steps up pressure

Right now, lawyers for the Ministry of Business, Innovation and Employment are deciding whether the investigation should proceed, which could result in punitive anti-dumping tariffs against China.

But somehow, China learned of the application – and it is taking retaliatory action.

In the past week, representatives of New Zealand's biggest export industries have been called in by Chinese officials, and told to exert their influence to make sure the MBIE investigation does not go ahead.

To up the ante, they have been told China has begun consulting with its local food producers about imposing reprisal tariffs to slow down the access of New Zealand dairy, wool, kiwifruit and potentially meat to the 1.35 billion-strong Chinese consumer market.

JOHN HAWKINS/FAIRFAX NZ Trade Minister Todd McClay says competition issue not raised during recent talks with China's commerce minister.

Local producers are alarmed.

"A trade war with China is definitely not in our interests," says Andrew Hoggard, a Manawatu dairy farmer. "It's about 20 per cent of our markets and we're getting good market penetration with added value products in there."

Hoggard, who chairs the Federated Farmers dairy division, said many farmers were still struggling to meet mortgage payments and a number had been forced off the land, after last year's very low milk solid prices. The last thing they needed was to be slammed by Chinese trade barriers.

BEVAN READ/stuff.co.nz Glenbrook steel mill workers fear China is dumping cheap steel in the New Zealand economy, endangering their jobs and communities.

Highly-placed sources have confirmed China is applying pressure in an attempt to sway regulators away from imposing anti-dumping or countervailing duties – which are imposed when goods are subsidised – on imported Chinese steel. Zespri and Fonterra are said to have been heavied, and other exporters may have been.

Pacific Steel's parent company BlueScope Steel has also been strongly critical of the anti-dumping protections against Chinese imports in Australia, and is said to have applied for punitive measures there, as well. In New Zealand, Pacific Steel did not respond to a request for comment, and MBIE's acting manager of trade, Karl Woodhead, said the ministry could not confirm or deny if it had received an application.

Under World Trade Organisation rules "applications relating to anti-dumping or countervailing duties are confidential unless investigations are initiated", begging the question of how China found out.

BEVAN READ/FAIRFAX NZ Mark Palmer, right, has worked at the Glenbrook steel mill for 35 years, most of that as a steelworker on the furnaces. He and E tu union organiser Joe Gallagher are concerned about the impact of cheap Chinese steel imports on the livelihoods of local steelworkers.

The world's biggest trading nation believes the United States is leading an alliance of sycophantic nations, doing the US bidding by shutting down Chinese trade and trying to force its military out of the contested islands and atolls of the South China Sea.

Joe Biden landed on the USS John C Stennis aircraft carrier on Friday, where he thanked crew for their previous six months' work in the South China Sea and said, "we're going to be active in the region as long as all of you are alive".

He flies into New Zealand on Wednesday – and it seems certain relations with China will again be high on his agenda.

The US and the EU have been at the forefront of actions against Chinese steel exports. They believe China is dumping steel at prices far below the cost of production with its output far outstripping demand as its economy slows.

The US has imposed anti-dumping and anti-subsidy duties of up to 450 per cent on corrosion-resistant steel from China in the latest move against its steel exports. China described the move as "irrational". China would likely view any New Zealand move on steel as part of an orchestrated attack on its steel exports led by the US. However NZ industry representatives and officials have made it clear MBIE's processes are independent and rules-based and are not influenced by foreign powers.

China's unusual tactics have caused government and industry to close ranks. The Ministry of Commerce of China (MOFCOM) has denied consulting on retaliatory tariffs. Fonterra spokesman Phil Turner and Zespri's chief operating officer Simon Limmer both denied any knowledge of the Chinese industry consultation.

But trade expert Charles Finny, who has worked on China-New Zealand trade issues for decades, said sources in Government confirmed at least one major exporter had been told "the Chinese Government would like pressure to be applied to MBIE".

New Zealand was the first country to recognise China as a market economy – a fact that is likely to have sharpened China's response to any NZ move.

China believes any anti-dumping move against its 600,000 tonnes of exports to New Zealand would be out of proportion, when the value of the imports from China were less than 6 per cent of total New Zealand imports of similar productIt has said it thought New Zealand and China were "at peace" on trade issues – but apparently not.

Commerce Minister Gao Hucheng had been expected to raise the Pacific Steel complaint at his meeting with Trade Minister Todd McClay in China this week, where McClay was attending the G20 meeting. But McClay said no competition issues were raised.

Chinese ambassador Wang Lutong said there was no issue with the imported steel quality but the embassy had been discussing the industry's concerns with New Zealand authorities.

Speaking to TV3's The Nation in unscreened footage this weekend, he said: "I have no idea where the media got this information from. I couldn't possibly comment on the motivation and intention of those reports. What I can say is, we will have a very detailed investigation of any report concerning the quality of steel, and we spoke to your people about that. But I think both sides are satisfied with this procedure."

NZ First leader Winston Peters said China was "monstering" Fonterra, Zespri and the NZ steel industry. "And as for the upgrade of the trade agreement, it's all dependent on what stance we take on the South China Sea. That's the reality of it now.

"I can't believe the ministers haven't talked. You've got officialdom and business operating in isolation from government."

The Chinese Embassy had not responded to specific questions, by deadline.

– Additional reporting Gerard Hutching

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