USTR: No ‘meaningful progress’ to curb excess steel capacity

The Office of the U.S. Trade Representative, which participated in the G20’s second meeting of the Global Forum on Steel Excess Capacity in Berlin this week, expressed overall disappointment at the international effort to curb excess steel capacity.

   The Office of the U.S. Trade Representative, which participated in the G20’s second meeting of the Global Forum on Steel Excess Capacity in Berlin this week, expressed overall disappointment at the international effort to curb excess steel capacity.
   “The forum has not made meaningful progress yet on the root causes of steel excess capacity, and pointing to short-term developments and worn out promises will not cure the fundamental causes of the problem,” USTR said in a statement on Nov. 30.
   The forum, which was established by G20 in December 2016, brings together 33 member economies representing more than 90 percent of global steel production and capacity.
   Steel production capacity worldwide has increased in recent years and by 2016 generated a global surplus of about 737 million metric tons, the highest level seen in the industry’s history. Half of this overcapacity was attributed to China and its government policies promoting growth in foundries to produce steel.
   “If the announced capacity expansions until 2020 take place, excess capacity will further increase—exacerbating the imbalance,” the forum said in its latest report.
   “The imbalance between supply and demand is a global challenge that has led to a collapse in the fortunes of steel industries in all regions of the world. Excess capacity has driven down prices, employment, capacity utilization rates and profitability for steelmakers, putting at risk the viability of an industry that produces a material which is vital for the functioning of economies and societies. It negatively affects the environment,” the forum report said. “Further significant reductions in global excess capacity will be needed in order to avoid a prolonged structural crisis in the steel industry.”
   The forum said that governments must quickly develop policies to curb excess steel production, such as eliminating subsidies, no matter how economically painful in the immediate future, for the sake of an efficient world production.
   The forum report noted that China has already initiated some steel “supply-side” reforms. They include a goal to reduce its steel production capacity by 100-150 million metric tons between 2016 and 2020. Some of this is being done by shutting down outdated, polluting facilities. The Chinese government recently earmarked RMB 100 billion for a special fund to help transition works affected by the capacity reductions in the steel and coal sectors. 
   USTR’s reaction to the forum report shows impatience with the G20’s effort. “Addressing the ongoing steel excess capacity situation will require immediate and sustained concrete action by all steelmakers, including allowing markets to function, removing market-distorting subsidies and other forms of state support, and treating state-owned enterprises and private steelmakers equally,” the U.S. trade negotiator said.
   “Progress on recommendations, information sharing plans and additional scheduled meetings must give way to real policy changes. Much work remains,” it added.
   Other G20 members were more praiseworthy of the forum’s steel capacity control work thus far. 
   “I am pleased that all major steel-producing countries have reached agreement on the principles that should guide actions to address the root causes of excess capacity and ensure a level playing field for the global steel industry and reduce trade frictions in the sector,” said  François-Philippe Champagne, Canada’s minister of international trade, in a statement.
   “In the run-up to the World Trade Organization’s 11th Ministerial Conference in Buenos Aires (Dec. 10-13), this success underlines the importance of effective multilateral cooperation to solve global problems,” said European Commissioner for Trade Cecilia Malmström. “Of course, our work is not yet done. Now we need to walk the talk. Our industry, our workforce, our consumers and citizens depend on these commitments being carried out effectively.”
   China’s response to the forum’s report was more defensive. Reuters reported that Assistant Chinese Commerce Minister Li Chenggang felt his country is being unfairly singled out by the global demand for steel capacity cuts. “Capacity reduction is a painful process, China has had to reallocate hundreds of thousands of workers. We call upon producers in the world to work together and take effective measures to reduce capacity,” he said.
   The Global Forum on Steel Excess Capacity plans to meet at least three times in 2018 to further discuss, assess and review the report’s information, urging members to “swiftly and fully apply the agreed principles and recommendations.”
   USTR said it “remains fully engaged in working with forum members for strong actions to address the root causes of the global steel excess capacity crisis,” but added that it will “not hesitate to use the tools available under legal authorities to firmly respond to the causes and consequences of steel excess capacity.”