The reason? It’s clear China won’t keep its promise to reduce steel overcapacity.
Actions speak louder than words — and it is time to recognize that China will not make the changes necessary to reduce its massive industrial capacity unless there is a real cost.
That was the message United Steelworkers International President Leo Gerard had for the U.S. Trade Representative and Commerce Department on Tuesday morning during a hearing on overcapacity in the global steel market. More than 13,500 Americans are holding layoff notices because of the steel imports crisis, Gerard noted, adding that steel isn’t the only sector impacted —aluminum, paper, rubber and others also have been effected by China’s trade cheating.
“China’s overcapacity is not the result of ‘market forces.’ China has developed its overcapacity because it is a non-market economy,” Gerard said. “It has continued to build its productive capacity in steel and other sectors because it was reliant on an export-led economy to employ its people and fuel its growth. This was built as a result of state-led direction, through its Five Year Plans and associated government policies.”
While China’s government has pledged to reduce its steel production, Gerard noted that “time after time, these promises and intentions have been followed by rising capacity.” Baosteel, a state-owned steel producer, recently announced it is increasing its steel output by 20 percent, for example.
Gerard wasn't the only witness calling for action on Tuesday morning. Members of Congress from both parties also testified, urging the Obama administration to fully implement and utilize trade enforcement measures to address the steel imports crisis, including new customs legislation that went into effect earlier this year.
Rep. Sandy Levin noted it might be necessary to impose emergency “Section 201” import restrictions to curb steel imports, a point echoed by several Members. Sen. Sherrod Brown also called upon the United States to bring a World Trade Organization case against China for promoting excess steel capacity.
“China is in violation of its WTO obligations, and we need, along with our global allies, to hold them accountable,” Brown said.
Many Members also argued that China should not be granted market economy status when it comes up for review in December. Gerard agreed.
“This isn’t some esoteric theoretical issue,” he added. “If China were to be granted Market Economy Status later this year by the U.S., which would completely run counter to the existing statutory test, it could dramatically undermine the effectiveness of our antidumping laws. Right now, the antidumping cases that have been filed by industry and supported by our Union are the only things helping to limit what would be an ever greater crisis in the steel sector.
The U.S. government should make clear that China is not a market economy and is unlikely to be considered such for a long, long time.”