U.S., E.U. and Japan Will Team Up to Take on China’s Overcapacity

Matthew McMullan

Matthew McMullan Communications Manager, Alliance for American Manufacturing

China’s out-of-control industrial overcapacity is among the problems stemming from its state-run economy. And while the United States has been skeptical of the global trading system in addressing some areas, it doesn’t look like it is abandoning its trading partners in this particular fight.

The U.S., European Union and Japan will announce announced on Tuesday that they are forming a new alliance to take on China over trade issues such as steel overcapacity and forced intellectual property transfers, the Financial Times reports. Although China was not directly named in the statement, it is clear that it is the target of the new alliance — something E.U. Trade Commissioner Cecilia Malmstrom confirmed on Tuesday. “There’s no secret that we think that China is a big sinner here,” she said.

The statement isn’t out yet (we’ll post it when it becomes available). UPDATE: Here it is! But along with being another step to finally tackle industrial overcapacity, it also appears to be an effort to delay or halt national security investigations into steel and aluminum imports that were launched by the Trump administration earlier this year. The Financial Times explains:

“Mr. Trump and his aides have lashed out at China and revived US trade statutes to launch controversial investigations that could lead to punitive tariffs and other trade sanctions.

But the EU and Japan have been seeking to talk the administration out of unilateral action, arguing that co-operating with the EU and countries like Japan would better serve US interests and do more to raise pressure on Beijing.”

As we’ve outlined numerous times before, China is driving global overcapacity — it is subsidizing the production of its industrial industries, which make far more product than the world needs. All that steel, aluminum and more is dumped into the global market at rock-bottom prices. This has created a massive glut in sectors like steel and aluminum and led to major layoffs and plant closures in the United States and around the world

To be honest, we’re doubtful that what the U.S., E.U., and Japan promised in their statement will be super effective unless there are tangible, enforceable actions put into place to finally halt China’s out-of-control industrial overcapacity. If the language released on Tuesday is just another strongly worded statement, similar to the one put out by the Global Forum on Steel Excess Capacity a few weeks ago, we can expect the crisis to continue. (Update: It was indeed strongly worded. We still need tangible actions.) 

Meanwhile, the Trump administration continues to sit on its national security investigations into steel and aluminum imports. It’s past time to release the findings of these “Section 232” investigations and take meaningful action to safeguard American steel and aluminum.

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Reposted from AAM

Posted In: Allied Approaches, From Alliance for American Manufacturing

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