Trade Cases

China Withdrawal from Global Forum “Deeply Regrettable”

Written by Sandy Williams

The U.S. ambassador to the World Trade Organization singled out China on Tuesday for its withdrawal from the Global Forum on Steel Excess Capacity.

In comments delivered at the WTO Committee on Subsidies and Countervailing Measures, Ambassador Dennis Shea said it was “regrettable” that China chose to terminate its membership in the Global Forum.

“Unfortunately, not all Global Forum members remain committed to the process,” said Shea. “China, in particular, has elected not to continue its work in the Forum process beyond 2019. The departure from the Forum’s work of the world’s largest producer of steel – one with more steelmaking capacity than the rest of the world combined – is deeply regrettable.”

Shea continued, “The continuing problem of global excess capacity in steel and other industrial sectors can only be addressed with the cooperation of economies where these capacities are largest. For this reason, we hope China will rejoin the community of partners pursuing collective solutions to the problem.”

At the October meeting of the Global Forum, China called for the forum to be dissolved. China stated that it had made the “greatest and most outstanding” efforts to reduce excess steel capacity since it was the only country that had self-imposed a mandatory target.

“China has slashed total steel production capacity by more than 150 million tonnes since 2016, or 114 percent of the global steel capacity cut … and China has redeployed 280,000 steel workers, which is more than the combined deployed number of steel workers in the U.S., the EU and Japan,” said China’s Ministry of Commerce.

According to reporting by World Trade Online, China responded that overcapacity is not part of the purview of the Subsides and Countervailing Committee and should not be on the agenda. The EU argued that subsidies are a major contributor to overcapacity and also urged China to rejoin the Forum.

China noted that most of the steel it produces is used domestically and that overcapacity was a structural issue left over from the financial crisis. Trade protectionism is making the problem worse, said China, and accused the U.S. of using Section 232 tariffs to increase its production while China was working to decrease its capacity.

The U.S. countered the financial crisis claim by arguing that China’s steel capacity increasing 78 percent from 2009 to 2015.

Thomas Gibson, CEO of the American Iron and Steel Institute, attended the last Global Forum and was disappointed that China had chosen to leave the GFSEC. “AISI is a supporter of the GFSEC. The reason for the Forum’s creation—a crisis of capacity overproduction that does not seem to be demanded by market forces—persists. The current OECD estimate of the excess of capacity over production is still more than 440 million metric tons in a world that only demanded 1.7 billion metric tons in 2018,” he said.

“China is far and away the biggest problem for global overcapacity. Chinese steel production in 2018 hit a new record of more than one billion tons, an increase of 6.9 percent year-over-year, and is on track to set yet another record in 2019. Disturbingly, the most recent report from the OECD on this topic warns that ‘capacity and production developments from the first half of 2019 point again to a widening gap between capacity and production this year.’ In recent years, the Chinese government continues to proclaim reductions in their steelmaking capacity, but we remain skeptical of the capacity reduction figures cited,” Gibson added.

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