Economy

AIIS Address Global Steel Overcapacity at USTR Hearing

April 10, 2016

The American Institute for International Steel submitted comments and will provide testimony on overcapacity in the global steel industry at a hearing convened by the U.S. Trade Representative on April 12, 2016.

AIIS recognizes the damage caused to the U.S. steel industry from sustained excess steel capacity and urges the United States and the Organization for Economic Co-operation and Development (OECD)* to engage in talks to address excess steel capacity and its related challenges. AIIS hopes such talks will result in “achieving a permanent, broadly applicable solution that results in meaningful commitments that are capable of being monitored.”

China is recognized as a major contributor to excess steel capacity, contributing a 91 percent share of the 57 percent rise in global steel production from 2004 to 2014, according to calculations by consulting firm Rhodium Group. The increase in China steel production was supported by state subsidies and state owned enterprises. China is currently in the process of trimming back its steel production but in its comments to the USTR, AIIS said “it is not likely that absent any new sustained diplomatic effort, we will soon see meaningful structural reform in the Chinese steel industry.

AIIS offers six principles to guide the way forward in global steel excess capacity talks:

First, the excess steelmaking capacity issue should be raised as an agenda item at the highest international levels, particularly at the Group of Twenty (G20) meeting this year in Beijing. The G20 is an appropriate forum in which to address this matter because it was specifically created to address high-level policy issues affecting global economic stability. Also, the G20 framework, like that of the OECD, allows for broad participation by the key global economic powers.

Second, the United States and other concerned parties should seek firm political commitments in international forums such as the G20 to reduce excess steelmaking capacity, and to do so in a way that can be readily monitored.

Third, with regard to any international discussions or negotiations concerning reductions to excess steelmaking capacity, we should not let the perfect be the enemy of the good. At the same time that we engage in discussions in the OECD and elsewhere, we should engage in the necessary diplomatic spadework in capitals so that we can fully engage as many allies as possible in the overall effort to help push this process forward.

Fourth, we should be prepared to innovate with policy responses that help end trade-distorting practices, and to consider the broadest range of ideas, both old and new.

Fifth, the ultimate aim of these international discussions should be to turn political commitments into new binding disciplines on SOEs and related trade-distorting subsidies.

Sixth, our international partners should know that the United States speaks with one voice in the OECD and elsewhere. The appropriate Congressional Committees should be engaged throughout this process, on a bipartisan basis.

*OECD is an international organization dedicated to global economic development. The 34 member countries and the European Commission work closely with emerging and developing countries to achieve the goal of a “stronger, cleaner, and fairer world.”