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USTR Slams “Worn Out Promises” of G20 Global Steel Forum, Urges Action

Posted December 01, 2017

At a G20 industry summit that wrapped up in Berlin yesterday, the world’s largest steel-producing countries agreed to dismantle “market-distorting subsidies and government support measures” as they grapple with the stubborn problem of global oversupply, but wide division remained between China and the United States over how best to achieve that.

China, which now accounts for half of global steel production and is the world’s largest exporter, claims it is implementing painful structural reforms to its industry and argues that because the glut of steel is at least partly the result of weaker global demand, other producers should also cut capacity. “Steel overcapacity is a common challenge facing countries across the world, rather than a problem unique to one country,” an official said following the meeting.

Facing a rising tide of imports from China’s eight-fold expansion in output over the past 20 years, struggling steel producers in the U.S. and other countries see Beijing as the main culprit behind the flood of cheap steel roiling global markets and question whether the capacity cuts touted by Chinese government agencies are real.

With these factors in mind, leaders of the world’s 20 biggest economies tasked trade officials at the group’s recent meeting in Hamburg to come up with a plan to reduce global steel excess capacity by the end of November.

In a 52-page final report, the 33 member countries participating in the forum committed to taking “tangible and swift policy action” based on six broad “guiding principles” aimed at leveling the playing field among steel companies of “all types of ownership,” to ensure competitive, market-based outcomes in the sector.

Although U.S. Trade Representative Robert Lighthizer skipped the forum, his chief of staff Jamieson Greer was in attendance and at a final press conference criticized the body for having failed to make any “meaningful progress” in addressing the “fundamental causes” of the oversupply problem. Greer also knocked the group’s final report for failing to call out the “recurring failure” of some countries to implement market-based reforms.

A subsequent statement from the USTR expanded on his remarks:

The United States welcomes international engagement and initial steps in addressing steel excess capacity issues. Progress on recommendations, information sharing plans and additional scheduled meetings must give way to real policy changes. Much work remains.
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. 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. This view is shared by nearly all Forum members, and we welcome this recognition.
The Report issued today contains many helpful policy prescriptions, but it fails to highlight the recurring failure of some countries to implement true market-based reforms in the steel sector. In addition, the Report does not contain complete information regarding market-distorting measures in certain economies and does not set forth a clear pathway for filling such data gaps. The Report erroneously suggests that simply setting capacity reduction targets has been an effective response to the crisis, when in fact meaningful progress can only be achieved by removing subsidies and other forms of state support and letting markets do their work.
The United States remains fully engaged in working with Forum members for strong actions to address the root causes of the global steel excess capacity crisis. At the same time, the United States will not hesitate to use the tools available under legal authorities to firmly respond to the causes and consequences of steel excess capacity.”

European Union Trade Commissioner Cecilia Malmström warned that any actions the U.S. takes to address overcapacity must adhere to World Trade Organization rules. She contended while the report marks progress, “now we need to start walking the talk as well.”

“I think it is clear to everyone that this forum is important but it will not solve all the questions,” Malmström said.