China Subsidy Elimination Not Enough for USW

Written by Sandy Williams

During the Steel Caucus hearings last week USW International President Leo Gerard articulated the plight of more than 13,500 U.S. steelworkers that are currently holding layoff notices and the need for immediate action to address the flood of foreign steel imports and global overcapacity.

“The current steel crisis is primarily caused by unfair foreign trade that includes dramatic expansions of global overcapacity,” said Gerard. “The largest source is China, which currently has more than 400 million metric tons of overcapacity.

“We need an immediate action plan to address this crisis that includes: broad-based import restraints; comprehensive, enforceable measures to reduce global overcapacity; a definitive statement declaring that China does not qualify as a market economy under U.S. law along with engagement with the European Union to ensure that they do not grant China market economy status later this year; stimulation of domestic demand; aggressive enforcement and expansion of domestic procurement policies; and, retention of domestic procurement policies in international trade negotiations.”

The USW and U.S. Rep. Pete Visclosky, D-1st viewed China’s decision to eliminate some subsidies with caution.

“The agreement is one good step forward,” Visclosky told the Chesterton Tribune. “However, the agreement will not make the 700 million tons of excess global steel capacity, including China’s 425 million tons of excess steel, vanish into thin air. China continues to pose a real and constant threat to American workers and their families, and I will continue to work every day to fully enforce all of our trade laws and stop the influx of illegal steel imports.”

A USW report, Chinese Steel Overcapacity: A Legacy of Broken Promises, enumerates the failure of China to make good on its promises to reduce steelmaking capacity. Beginning in 2009, “Beijing has been issuing plans, writing memoranda and guidance, and making promises in bilateral negotiations to address its overcapacity in the steelmaking sector,” said the USW. The report concludes:

“Unfortunately, if one thing has been made clear from China’s years and years of broken promises and obvious falsehoods regarding overcapacity, the international community simply can no longer trust China to actually address this problem. The Chinese government views this overcapacity as a strategic interest and a driver of domestic social stability. It simply will not give up this advantage on its own, no matter how often it makes and breaks promises to do so.”

In a statement in advance of the steel hearings Gerard wrote:

“The USW strongly supports two initiatives, one by Congresswoman Rosa DeLauro, the other by Senator Sherrod Brown. The DeLauro measure would require congressional authorization before an administration considers China to be a market economy. Calling China a market economy would drastically undermine the effectiveness of our trade laws and undermine the potential benefits of trade cases.

“The second action is an effort by Senator Sherrod Brown to engage the World Trade Organization (WTO) to reign in China’s overcapacity, which is the root cause of many of our problems. Right now, China has the capacity to produce 1.2 billion metric tons of steel – almost 500 million more tons than it needs. Its excess capacity is depressing world prices, driving competitors out of business and causing massive layoffs. Mere discussion of this problem by the rest of the world has not resulted in a solution. The WTO must make clear that market principles require that China not only cut back, but actually dismantle significant production.

“These are two important steps in a multifaceted strategy. The time for talking has passed. The time for action is now.”

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