Trade Cases

U.S. Rebuffs Forum Report on Steel Excess Capacity

Written by Sandy Williams

The Global Forum on Steel Excess Capacity presented a report last week in Paris agreeing to reduce steel capacity wherever necessary, keep overcapacity from reoccurring in the future and eliminate subsidies and other market distortions that contribute to overcapacity.

“This sends a clear message: we will not repeat the costly mistakes of the past, and must tackle excess capacity and its root causes to avoid dire social, economic, trade and political consequences in the future,” said Jyrki Katainent, co-chair of the Paris ministerial meeting hosted by the G20. “This will protect growth and jobs in an efficient, sustainable EU steel industry. A lot of work lies ahead, though, and all members of the Global Forum will have to continue implementing their commitments resolutely and report to G20 leaders.”

The report “constitutes a solid first step in the application of the principles and recommendations that the members agreed to last year during the German presidency” and recognizes the “need to take measures leading to further capacity reductions,” said Miguel Braun, Argentina secretary of commerce and chairman of the meeting.

Forum members outlined the three main areas of concern:  1) acknowledging the challenge and necessity of cooperative solutions; 2) market function and adjustment; 3) improved transparency, review and assessment of market developments and steel policy.

The resulting agreement focuses on six principles that members agree to act upon swiftly:

  • Global challenge, collective policy solutions
  • Enhance market function (1): Refraining from market-distorting subsidies and government support measures
  • Enhance market function (2): Fostering a level playing field in the steel industry
  • Enhance the market function (3): Ensuring market-based outcomes in the steel industry
  • Encouraging adjustment and thereby reducing excess capacity
  • Ensuring greater transparency as well as review, discussion and assessment of the implementation of the Global Forum policy solutions

“The level of demand growth is relatively modest. Therefore, if we do not focus on reducing capacity, the markets will continue to suffer the consequences,” said José Ángel Gurría, Secretary General of the OECD.

Thirty-three countries agreed to the report presented at the ministerial meeting.

The European Commission applauded the measures agreed upon by the Forum noting that it had acted, among others, to defend its steel industry from unfair trade, including imposing 53 antidumping and anti-subsidy measures and activating legal and political tools to “fight unjustified U.S. 232 measures.”   

Commissioner for Trade Cecilia Malmström said: “The global challenge of overcapacity has strained trade relations and the global trade architecture to its breaking point. Progress in this Forum at this sensitive time demonstrates that multilateral cooperation is not only possible, but that it is actually the best tool to tackle global challenges. Putting this agreed package in place is something that the European Union will now follow closely. Our workforce and our industry depend on these commitments being carried out.”

The Office of the U.S. Trade Representative was less supportive of the work of the Global Forum, questioning whether the group has the ability to deliver on its promises.

The USTR statement follows: “The United States has been an active and committed partner in this process, working to seek prompt implementation of the Forum’s past policy recommendations, which are aimed at reducing excess capacity as well as restoring balance and market function in the global steel sector.

“Unfortunately, what we have seen to date leaves us questioning whether the Forum is capable of delivering on these objectives. We do not see an equal commitment to the process from all Forum members. Commitments to provide timely information critical to the proper functioning of the Forum’s work, for example, have gone unfulfilled. More importantly, we have yet to see any concrete progress toward true market-based reform in the economies that have contributed most to the crisis of excess capacity in the steel sector.

“A report was issued today that illustrates the struggles and limitations of the Forum process to date. Like in years past, the report underscores the urgency of the problem of excess capacity and makes recommendations about how to address it. But the report will do nothing to solve the fundamental causes of the problem. This will happen only when those that have created this problem act to remove subsidies and other measures that distort markets and create serious global imbalances, and take action to eliminate excess capacity.

“The United States remains fully engaged in solving this problem and is willing to work with like-minded partners to find solutions to the continuing crisis of global excess capacity in the steel sector. However, we will not sit idly by while the effects of this crisis imperil our companies and workers and threaten to impair our essential security interests.”

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