US joins EU, Japan, Canada, Mexico, and others in calling out Bejing on overcapacity.
The United States has joined the European Union, Japan, Canada, Mexico, South Korea, Switzerland, and Turkey in weighing in on the steel overcapacity problem. The governments issued a joint statement that, among lots of other stuff, said they would
Ensure that their governments and government-supported institutions do not provide subsidies or other support that i) sustain uneconomic or consistently loss-making steel plants, ii) encourage investment in additional steelmaking capacity which would otherwise not be built or iii) otherwise distort competition.
Nowhere in the statement is the word “China” used, but it’s clearly calling out the Chinese government, especially after it was confronted this week regarding its gigantic, state-sponsored steel industry and basically told everyone to “talk to the hand.”
Not cool, China.
According to a Business Insider analysis, this flood of Chinese commodities that the market didn’t ask for is only just beginning, and it will take a long time to clear all of it. It then goes on to suggest:
The thing is, what makes this a complicated issue is that China doesn't really have a choice in this matter. In fact, if it wants to become an economy that is actually driven by market factors rather than government planning, it has to sell all of this extra stuff it has lying around that it seems the world is no longer interested in.
That may be so. But that doesn’t mean Chinese state-owned steel mills should be allowed to sell off their subsidized steel in open markets like America’s. They’re basically exporting their employment problem, and that’s not fair. Washington needs to stick to its guns on this one and consider trade action if China doesn’t cut capacity immediately.