Seven years ago, the aging state-owned Weifang East Steel Pipe factory in China's northern coastal plains was insolvent, strangled by debts and unable to pay its workers.
At first, they responded by blocking the factory gates and marching angrily on a nearby municipal building. Then, inspired by the spirit of capitalism consuming modern China, more than 50 employees borrowed from banks against their homes to buy the company, install new equipment and produce higher-quality steel pipe, this time for export.
The newly privatized factory was proudly humming again.
But today it is in a new crisis, and this time the workers' anger is aimed at the United States, which is set to impose punishing new tariffs on Chinese steel pipe imports early next year, at the behest of struggling American steel makers.
Hundreds of plant workers have been idled, and more layoffs are in the offing.
''We have followed market principles and been faithful to our American customers,'' said Wu Jingsheng, the Weifang plant's gruff general manager, looking around a workplace that has shut most of its operations in anticipation of the tariffs. ''Our workers don't know why they are being treated this way.''
In an atmosphere roiled by disputes like the one in Weifang, the U.S. Treasury secretary, Henry Paulson Jr., and other cabinet members are preparing for the next round of a ''strategic economic dialogue'' beginning in Beijing on Wednesday, aimed at easing tensions between the two sides.
Despite the dialogue, at times the two nations seem to be talking past each other, aggravated by U.S. actions like the steel duties threat. At a time of heightened American anxiety over the effects of globalization, the factory illustrates what trade disputes boil down to: American versus Chinese jobs and profits.
While the Bush administration charges that China unfairly and illegally subsidizes its exports to undercut U.S. producers, the Chinese deny that subsidies are a factor and only see American actions as an unfair assault on China's use of Western business models to modernize, provide jobs and take its rightful place in the world.
The move to impose duties on Chinese steel pipe was part of a flood of litigation that flowed from an earlier decision to sanction Chinese companies.
That move came under pressure from Congress, newly controlled by Democrats who are irate over Chinese imports that have led to record trade deficits.
And as the Weifang plant vividly shows, steel is a particular irritant. To meet its huge construction needs, China has become the world's largest producer, and the world's largest consumer, of steel and steel products like pipe. Only since 2001 has it become a net exporter of steel, with cheaper goods threatening the ability of U.S. companies to compete.
Though steel pipe exports accounted for less than $1 billion of the $232 billion trade deficit with China in 2006, China has doubled its share of pipe - used to make everything from scaffolding to sprinkler systems - sold in the United States in two years to more than a quarter of the market. In the same period, several U.S. steel pipe factories have shut down, throwing hundreds of Americans out of work.
U.S. producers of steel pipe charge that though the Weifang factory is now private, it benefits from past subsidies for land, utilities and other costs, and current subsidies for raw steel. The administration says that China is using subsidies to engulf the world with a ''harmful glut'' of steel.
''We're extremely concerned that the Chinese steel industry is not market driven but driven by subsidization,'' said David Spooner, assistant secretary of commerce for import administration.
In response, China argues that it is not subsidizing steel and that the current surge in exports is only temporary as it shuts down polluting, inefficient factories.
''China's steel industry is not export-oriented,'' Chen Haoran, the recently retired chairman of a government-backed trade association, said in a speech in Hong Kong last month. ''It is not imposing and will not impose any threat on the supply-demand balance in the world market.''
The Chinese are also angry at the administration's increasing reliance on litigation, whether by supporting petitions from U.S. manufacturers for duties on steel pipe and other Chinese goods, or by taking China to court at the World Trade Organization.
Administration officials admit that Chinese leaders see the imposition or threat of duties, or litigation at the WTO, just as the workers at the Weifang plant do: as an act of bad faith.
''They think if you sue them, you've insulted them,'' said an American negotiator, speaking anonymously to be more candid.
''The U.S. litigates at lunch, dinner, breakfast and so on,'' said Pascal Lamy, director general of the WTO, in a recent interview. ''In China, when you litigate, it means that your relationship is so deteriorated that one side will have to lose face, which is the worst thing you can do to someone in the Chinese culture.''
U.S. officials, on the other hand, say that the efforts to challenge China legally have paid off. Last month, at the risk of losing face, perhaps, the Chinese agreed to terminate a dozen subsidies and tax rebates that the United States had charged, in a suit at the WTO, were promoting exports in several sectors.
The Weifang steel factory illustrates how deeply the resentments of the United States pervade Chinese society. Situated in the windy and flat plains of Shandong Province near the Yellow Sea coastline, Weifang used to be an agrarian region famous for its vegetables until after the Cultural Revolution of the 1970s.
In the last couple of decades, it has become an industrial center producing chemicals, electronics, textiles and diesel engines. At the Weifang East Pipe factory, workers being laid off say they will have to switch to lower-paid jobs selling vegetables, driving motorcycle taxis or in construction. At the plant, their average annual wage is 29,600 yuan, or $4,000.
A tour of the factory was arranged by William Barringer, a Washington-based partner at the law firm Vinson and Elkins, which represents both the Weifang company and the Chinese government as it battles American actions.
Barringer explained that of 400,000 tons of pipe produced each year, 300,000 were exported, suggesting that, despite Chinese claims, some of its steel factories were geared toward exports. The only production now is of steel pipe for the domestic market.
A third of the overall U.S. trade deficit is with China, and China is now the object of nearly a third of the 257 American actions imposing duties on imports from 41 countries on charges that they are dumping or unfairly subsidizing their exports.
Steel pipe, further, is one of 19 targets of new Commerce Department investigations into possible unfair export practices. The other imports include chemicals, paper bags, off-road tires, magnets and film.
China's steel production, projected at 470 million tons this year, is now about 40 percent of the world's output, and greater than the output of the United States, Europe and Japan put together.
Most of it is consumed by China itself, but Americans worry that the trend is toward more and more Chinese steel coming into the United States.
The U.S. companies that have to compete with Weifang argue that it benefits not only from low-cost loans, utilities, debt forgiveness and land but that the raw steel that goes into the plant is also subsidized.
American producers have also modernized but say they still cannot compete.
''Essentially, we believe we are competing against the Chinese government, not the private sector,'' said Armand Lauzon, chief executive officer of John Maneely, which says it closed five of its 16 plants in recent years because of foreign competition. ''With that sort of competition, I need help.''International Herald Tribune
