Steelworkers (USW) and U.S. Rep. Pete Visclosky, D-1st, are both taking with
a grain of salt China’s pledge to end illegal government export subsidies to
its steel industry.
That pledge was
announced on Thursday by U.S. Trade Representative Michael Froman.
government’s subsidization of its steel industry has allowed it to sell
exported product in the U.S. at prices far below the cost of production,
low-balling domestic steel and grabbing large new swathes of market share.
The result: over the last year or so, some 13,500 steelworkers have received
layoff notices, as U.S. Steel Corporation, ArcelorMittal, and other
steelmakers have idled or shuttered facilities.
Among other things,
China has agreed to end direct central-government subsidies to enterprises
in seven different sectors, including metals. It has also agreed to
terminate preferential service agreements between sub-central government
units and industry, under which, for instance, companies have received free
or discounted utilities. Finally, China has agreed to prohibit sub-central
units from awarding export-contingent cash grants.
“Today we have
signed an agreement with China to eliminate export subsidies that the United
States challenged because they are prohibited under (World Trade
Organization) rules,” Froman said. “This is a win for Americans employed in
seven diverse sectors that run the gamut from agriculture to textiles to
medical products, who will benefit from a more level playing field on which
“The agreement once
again underscores,” Froman added, “President Obama’s commitment to enforce
our trade rights aggressively to secure real economic results for American
workers, farmers, and businesses of all sizes in every part of the country.”
For the USW and
Visclosky, though, China’s pledge to kill its subsidy program is only part
of the solution to the problem of depressed prices and market-share loss,
because the subsidies were prompted in the first place by a more deeply
rooted distortion: Chinese vast steel overcapacity.
According to the
USW, in 2000 China’s annual steelmaking capacity was roughly the same as
this country’s, around 100 million tons. By 2014, its capacity had increased
tenfold, to 1.2 billion tons.
“This growth has
taken place at a rate far faster than domestic and international demand
would dictate,” the USW stated in a recent report, entitled “Chinese Steel
Overcapacity: A Legacy of Broken Promises.” “As a result, China’s steel
industry is actively and deliberately flooding the international market with
over a 100 million tons of steel each year. Steel plants in the United
States and around the world are being forced to close, laying off thousands
of workers in the face of China’s torrent of excess steel.”
accordingly viewing the U.S. Trade Representative’s agreement with China
with caution. “The agreement is one good step forward,” he told the
Chesterton Tribune today. “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.”
The USW, for its
part, is lobbying for more aggressive action with regard to China. First, it
supports an initiative under which a move by the Obama Administration to
grant market-economy status to China would first require congressional
authorization. China’s current non-market economy status allows the U.S. to
respond “more effectively to any unfair trade practices of a state-run
economy (like China’s) by ensuring that its domestic trade remedy laws can
be fully enforced.
Second, the USW is
insisting, as International President Leo Gerard testified on Thursday
before the Congressional Steel Caucus, that the World Trade Organization
“must make clear that market principles require that China not only cut back
but actually dismantle significant production,” up to 500 million tons of
its 1.2 billion-ton capacity. That “excess capacity is depressing world
prices, driving competitors out of business, and causing massive layoffs,”
In any case, the
USW says it has cause to doubt China’s promise to terminate subsidies. In
the “Chinese Steel Overcapacity” report, the union documents what it calls
four separate “Broken Promises”:
* In 2009 China
pledged to cut its steel output by 12 percent, to 460 million tons from 521
million in 2008. Instead, the USW said, China’s steel production
increased to 577 million tons in 2009, and to 700 million in 2010.
* In 2010 China’s
State Council announced plans to stop greenlighting any further steel
capacity expansion projects. Yet in 2011 60 million more tons of capacity
were brought on line.
* In 2011 China
released its 12th Five-Year Plan, which similarly “identified the need to
suppress” excess steel capacity. Yet in 2012 96 million new tons were
brought on line.
* In 2013 China
“issued guidance to curb the excess capacity of steel.” By 2014, however, 70
million additional tons had been brought on line.
conclusion from the record: “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.”