US Critical of Global Steel Forum Report, Calls for Concrete Capacity Reduction Efforts
The U.S. called for "real policy changes" and said “much work remains” for addressing global steel overcapacity, in a pointed Nov. 30 statement at the conclusion of the Global Forum on Steel Excess Capacity in Berlin. “The Forum has not made meaningful progress yet on the root causes of steel excess capacity, and pointing to short-term developments and worn out promises will not cure the fundamental causes of the problem,” the statement from the Office of the U.S. Trade Representative said. “Addressing the ongoing steel excess capacity situation will require immediate and sustained concrete action by all steelmakers, including allowing markets to function, removing market-distorting subsidies and other forms of state support, and treating state-owned enterprises and private steelmakers equally.”
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But the forum's 52-page report claims it is recommending "concrete policy solutions," calling for governments and related entities to not provide "market-distorting subsidies and other types of support measures," to recognize the "role" of "legitimate trade defense instruments in this regard," and to facilitate the "exit" from the market of firms incurring consistent losses, including through proper bankruptcy procedures.
The report has “many helpful policy prescriptions,” but doesn’t highlight the “recurring failure” of “some countries” to implement “true market-based reforms” in steel, the U.S. statement says. The report also contains incomplete information on market-distorting measures in some economies and doesn’t outline a “clear pathway” for filling those data gaps, USTR said. “The Report erroneously suggests that simply setting capacity reduction targets has been an effective response to the crisis, when in fact meaningful progress can only be achieved by removing subsidies and other forms of state support and letting markets do their work,” the statement says.
Free-market functions must be enhanced and "underlying causes" of overcapacity must be addressed to ensure lasting solutions across the forum's 33 member economies, but "appropriately designed" administrative measures can bring "effective and immediate results," the report says. The U.S. remains “fully engaged” with forum members for “strong actions” to address the root causes of overcapacity, USTR said. “At the same time, the United States will not hesitate to use the tools available under legal authorities to firmly respond to the causes and consequences of steel excess capacity.”
During the closing of the forum meeting, Assistant Chinese Commerce Minister Li Chenggang gave warning that a situation should not develop in which China is absorbing the pain of efforts to cut steel capacity while other countries merely sit in observation, according to a Reuters report from the meeting. Reducing steel production means reallocation of hundreds of thousands of workers, Chenggang reportedly said.
A "robust monitoring system" will track forum members' implementation of the recommendations in 2018 and 2019, the EU said in a press release. "As co-chair of this Forum during next year, the EU will follow the implementation of these measures closely," EU Trade Commissioner Cecilia Malmstrom said in a statement. The EU in its release further called for member governments in the first half of 2018 to share with one another information on steps taken to eliminate market-distorting subsidies, and said the forum will meet at least three times per year to monitor implementation of the report's recommendations.
The American Iron and Steel Institute (AISI) in a Nov. 30 statement called for quick implementation of concrete actions to stem overcapacity, and noted that aggressive enforcement of U.S. trade laws, including Section 232 and antidumping and countervailing duty laws, is "critical" to prevent damage to U.S. industry. "Promises alone will not solve the problems facing the global steel industry; concrete actions by governments must follow in short order," AISI CEO Thomas Gibson said in a statement. The Commerce Department on April 19 launched an investigation that could result in the imposition of tariffs, quotas or other import restraints on steel, if steel imports are found to threaten national security before the review's mid-January deadline (see 1704200029).
United Steelworkers (USW) reacted sharply to the report. In a statement, USW noted that the report includes a set of principles and an acknowledgement that overcapacity is growing, and resulted from two years of talks and meetings. Absent any additional political action on excess capacity, the mere release of the report could signal to U.S. steelworkers that "political leaders are fiddling while Rome burns," the group said. "As attacks on the U.S. steel sector continue, only further dialogue is scheduled," the statement says. "The new report fails to identify specific disciplines, timelines or targets for resolving the problem." USW also called for "action on the Trump administration's steel Section 232 review," noting that its conclusion has "long passed" an original summer deadline. Commerce Secretary Wilbur Ross during a May hearing on the review said his department had hoped to finish the review by the end of June (see 1705240034).