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  December 2nd, 2017 | Written by

US and China Clash on Steel

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  • USTR: Report fails to highlight failure of China to implement market-based reforms in the steel sector.
  • USTR: Setting reduction targets is not an effective response to excess steel capacity.
  • EU: Forum “agreed on an effective package to tackle the pressing issue of global steel overcapacity.”

The United States Trade Representative slammed a report issued earlier this week by the Global Forum on Steel Excess Capacity. The forum was organized by the G20 group of countries to address steel excess capacity worldwide.

China is a major focus on the inquiry into excess capacity, and China’s representative to the forum differed with the US government’s approach toward excess capacity, saying it has already taken measures to rein in steel production.

“The forum has not made meaningful progress yet on the root causes of steel excess capacity,” a USTR statement said, “and pointing to short-term developments and worn out promises will not cure the fundamental causes of the problem. 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 forum’s report, the USTR went on to say, “fails to highlight the recurring failure of some countries,” referring primarily to China, “to implement true market-based reforms in the steel sector.”

The USTR contradicted the report’s conclusion that setting capacity reduction targets is an effective response to the situation.

The European Union had a different perspective, with Commissioner for Trade Cecilia Malmström saying that the forum “agreed on an important and effective package to tackle the pressing issue of global steel overcapacity.” “These wide-ranging policy solutions,” she added, “will help create a level playing field and support EU growth and jobs.”

But Assistant Chinese Commerce Minister Li Chenggang did not take kindly to the critical posture taken by the United States. He said China has taken “painful efforts to cut capacity” including displacing hundreds of thousands of workers and called on all steel producers to work together to reduce capacity. China claims it has cut 220 million tons of capacity since January 2016.

The US, the world’s biggest steel importer, has been pressuring China to cut more capacity and remove subsidies. The Trump administration launched a Section 232 investigation in April into whether steel imports pose a risk to national security, maintaining US steelmakers have been hurt by unfairly traded Chinese steel. US Commerce Secretary Wilbur Ross has until January 15 to submit his Section 232 report to the president. Trump would then have 90 days to decide whether to impose punitive tariffs on steel imports.

Commerce Department data released in October showed that the US steel industry posted a combined net income of $864 million in the second quarter of this year, up from a net profit of $515 million in the first quarter.