Obama Administration Files WTO Complaint Against China Over Aluminum Subsidies

By Elizabeth Brotherton-Bunch
Jan 12 2017 |
Longshoremen in Florida unload imported aluminum. | Photo by JAXPORT

It’s the 16th trade enforcement challenge Obama launched against China at the WTO.

The Obama administration filed a trade enforcement complaint on Thursday at the World Trade Organization (WTO) against China, citing unfair subsidies given to aluminum makers that is causing a glut in the global aluminum market.

The administration opted to file the WTO complaint after “numerous bilateral efforts… to persuade China to take strong steps to address the excess capacity situation in its aluminum sector,” according to the Office of the U.S. Trade Representative.

Here’s U.S. Trade Representative Michael Froman with more:

“Artificially cheap loans from banks and low-priced inputs for Chinese aluminum are contributing to excess capacity and undercutting American workers and businesses. Today’s action follows significant engagement by this Administration on excess capacity and demonstrates our commitment to hold China to its trade obligations.”

American aluminum manufacturers and workers have faced tough times in recent years because of China’s massive industrial overcapacity. More than 6,600 U.S. aluminum workers have been laid off as a result of China’s subsidies and aluminum facilities have closed across America, according to the United Steelworkers (USW).

In 2008, there were 14 active smelters in the United States; today, there are five. About 60 percent of primary U.S. aluminum capacity has gone offline in the past nine months.

USW President Leo Gerard said China’s goal is to “dominate world aluminum production.” It has increased its aluminum capacity by 22 million tons, or 130 percent, in the past eight years, which led to a 35 percent price decrease. “As a result, U.S. producers cannot get fair market prices for their products,” Gerard added.

It’s not just aluminum that has been impacted by China’s massive unchecked industrial overcapacity. More than 13,500 steelworkers have lost their jobs since early 2015 because of China’s unfair policies.

To respond, the Steelworkers and several steel companies filed a series of trade cases against Chinese companies. The Commerce Department issued several anti-dumping and countervailing duties in response, and workers are finally starting to see a little relief (although there’s still much work ahead).

But that type of response isn’t going to work for aluminum, Gerard said.

“If the USW had been able to bring a traditional trade case against China, we would have done so years ago but unfortunately traditional trade cases are not effective for basic aluminum,” Gerard added. “China’s massive, illegal subsidies have depressed world prices and made American domestic operations unprofitable, regardless of export levels. Only global action will be effective.”

The Obama administration’s decision to file the WTO complaint — its 16th against China and 25th overall — earned bipartisan support from Capitol Hill. Reps. Dave Loebsack (D-Iowa), Larry Bucshon (R-Ind.), Suzan DelBene (D-Wash.), Bill Johnson (R-Ohio) and Mike Kelly (R-Pa.) all offered statements supporting the case (all are also members of the Congressional Aluminum Caucus). Gerard noted that Sens. Ron Wyden (D-Ore.), Chuck Schumer (D-N.Y.), Rob Portman (R-Ohio) and Sherrod Brown (D-Ohio) also provided leadership to bring the problem to the USTR for action.

Portman and Brown wrote to Froman in October 2016 to request the WTO case, the pair noted in a joint press release.

"When China drives down aluminum costs by cheating, Ohio workers and manufacturers pay the price," Brown said. "Thousands have lost jobs because of unfairly subsidized aluminum from China that has flooded the market and led to overcapacity, and it's past time we get tough on these violations."

Tom Conway, USW International Vice President, echoed the Senator's remarks.

 “Every job counts. We have the most productive, efficient workers in the world. We can compete against anyone that plays by the rules, but we can’t compete against governments,” Conway said. “Chinese companies act primarily on behalf of and with the support of the state. That’s not economics.”