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Manufacture This

The blog of the Alliance for American Manufacturing

China doesn’t want the issue to come up — but the Obama administration plans to press it.

An interesting article popped up in our newsfeed this week from China Daily, an English-language newspaper run by China’s publicity department.

It’s titled “No need for G20 to discuss overcapacity.” Here’s an excerpt:

“As for general overcapacity, it should be a domestic, rather than global, issue and should be resolved within the concerned country’s pricing and trade policy framework. The disputes should be settled in accordance with the WTO rules. And the G20 should focus on resolving global issues related to climate change (that is, costs and subsidies associated with climate change) through existing international mechanisms and make efforts to end once and for all the lingering effects of the global financial crisis.”

Shorter version: We really don’t want to talk about our steel overcapacity problem, guys.

China doesn’t want to have to talk about its steel overcapacity problem because it has a problem. In fact, China even admitted it does! But it hasn’t done anything about it.

Nevertheless, the Obama administration plans to bring up the steel glut during the G20 Summit, which is set to take place in China starting Sept. 4. 

Treasury Secretary Jack Lew, speaking at the Brookings Institution on Wednesday morning, said “the president will press for action on excess capacity, most notably in the steel industry.” Lew noted that the Chinese have actually prepared policies to tackle the problem as part of larger structural reforms.

“I think we actually don’t have to convince them in theory,” Lew said. “What they need to do is tackle the very real challenge of pressing these changes down into the provinces, where steel capacity is owned by state-owned enterprises and other powerful interests, where they’re employing a lot of people, and it’s not just the local economy but the political and social system as well. So this is not easy, but I think they understand that if they don’t address it, it’s corrosive to China’s economy.”

Lew added:

“We’re pressing very hard on this. We’re urging them to take clear measures, both domestically and in the international arena, to make clear that this is something that they are determined to follow through on, and we will continue for the duration of our tenure to seek real, tangible process.”

China has been all talk, no action when it comes to addressing its excess steel capacity, which is massive and causing a global crisis — 19,000 U.S. steelworkers have faced layoffs and dozens of U.S. steel facilities have closed as a result.

President Obama and his team should definitely push the issue at the G20, continue to press China after the summit concludes and be willing to take appropriate action to level the playing field for U.S. workers and steelmakers until China makes real progress on its end.