Manufacture This

The blog of the Alliance for American Manufacturing

A new “Global Forum” will work to address global steel overcapacity, but more approaches are needed.

Well, it’s a start.

China didn’t want to talk about it — but G20 leaders made sure that China’s out-of-control steel overcapacity dominated much of the economic discussion during the annual G20 summit on Sept. 4-5.  And G20 leaders (including China!) pledged to work together to address excess steel capacity by… talking some more?

We’ll let the White House explain:

“G-20 leaders recognized that excess capacity in steel and other industries is a global issue that requires a collective response. The G-20 called for the formation of a Global Forum to take steps to address steel excess capacity and encourage adjustments, and to report back to the G-20 in 2017. Excess capacity is a global problem, and the Global Forum will provide an opportunity to help find a global solution.”

Look, it's a good thing that the world’s economic leaders took the issue of steel overcapacity seriously during the annual meeting. And yes, steel overcapacity is a global issue — but it is up to China to fix things.

As we’ve noted countless times here on the blog — and as Duke University’s Lukas Brun outlined in a new report released just last week — China is driving the global steel glut that has led to at least 14,500 U.S. layoffs and dozens of plant closures.

China’s steel companies are government-owned and operate without any regard to market forces. That’s led to massive overproduction — 75 percent of the world’s new steel stock since 2000 has come from China, and China’s excess steel capacity is greater than what U.S. steelmakers produce in an entire year.

The world knows this, too. At the G20, Brazil’s finance minister told Bloomberg that China “is at the heart” of the issue. European Commission President Jean-Claude Juncker suggested China should accept global monitoring of overcapacity in its steel sector.

Even China knows it. As Treasury Secretary Jack Lew explained last week, Chinese leaders know that they need to reduce their excess capacity, but have not yet taken on 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.”

Despite China’s public hesitation to discuss the issue during the G20, Chinese leaders also know it is in their best interest to keep talking about overcapacity as a global issue. As long as that is happening, China can continue to avoid taking real action.

The United States shouldn’t fall for this tactic. The Obama administration must strongly enforce our trade laws to ensure U.S. workers and companies don’t suffer any further because China continues to dodge its responsibilities. That's something the White House promised to do in its fact sheet on the Global Forum, and we hope the next president, whomever that may be, will do the same.

And in the meantime, the United States also should maintain China’s non-market economy status, making it clear that China will not be called a market economy until it has a track record of taking concrete action to address these problems.