Joint ac­tion can cut steel over­ca­pac­ity

China Daily (Hong Kong) - - VIEWS -

Due to the fee­ble global eco­nomic re­cov­ery and damp­ened global de­mands, China’s steel in­dus­try (and those in other coun­tries) faces over­ca­pac­ity. Dur­ing the US pres­i­den­tial cam­paign, ri­val can­di­dates said that by “dump­ing its steel prod­ucts”, China has caused the Amer­i­can steel sec­tor to lose its com­pet­i­tive edge. Dur­ing his cam­paign trail, Don­ald Trump even threat­ened to im­pose up to 45 per­cent puni­tive tar­iffs on Chi­nese im­ports if he was elected pres­i­dent.

Such rhetoric and pro­tec­tion­ist mea­sures, how­ever, will not help re­solve the global steel over­pro­duc­tion is­sue.

China has ex­ported only about 10 per­cent of its to­tal steel out­put ev­ery year over the past decade, which is far be­low the 40 per­cent of some de­vel­oped steel-pro­duc­ing coun­tries. How­ever, the United States and some Euro­pean Union mem­ber coun­tries have blamed China for the global steel over­ca­pac­ity and launched anti-dump­ing in­ves­ti­ga­tions into Chi­nese steel prod­ucts.

In May, the US In­ter­na­tional Trade Com­mis­sion in­voked Sec­tion 337 of the Tar­iff Act of 1930 to for­mally launch an in­ves­ti­ga­tion against more than 40 Chi­nese steel man­u­fac­tur­ers, al­leg­ing the com­pet­i­tive edge they en­joy is un­fair.

Iron­i­cally, Chi­nese steel ex­ports to the US and EU coun- tries, in vol­ume and value both, ac­count for only a small per­cent­age of their steel im­ports. So, im­pos­ing puni­tive tar­iffs on Chi­nese steel prod­ucts can only be a ploy to pro­tect their back­ward steel sec­tors.

China has never shied away from ac­cept­ing its sur­plus steel ca­pac­ity. In­stead, it has taken mea­sures to help lo­cal gov­ern­ments and en­ter­prises to re­duce over­pro­duc­tion. In Fe­bru­ary, the State Coun­cil, China’s Cab­i­net, is­sued a guide­line to elim­i­nate back­ward steel ca­pac­ity, an­other 100 mil­lion to 150 mil­lion tons of crude steel pro­duc­tion will be cut in the next five years, with 45 mil- lion tons to be slashed this year alone.

Speak­ing at the open­ing cer­e­mony of the G20 Hangzhou Lead­ers Sum­mit on Sept 4, Pres­i­dent Xi Jin­ping re­it­er­ated that China will keep its prom­ise of re­duc­ing its crude steel out­put dur­ing the next five years. Start­ing late Novem­ber, the cen­tral govern­ment has sent sev­eral in­spec­tion teams to dif­fer­ent re­gions to as­sess the progress made in elim­i­nat­ing steel and coal over­ca­pac­ity. And prov­inces such as Shanxi, Shan­dong, Jiangxi, He­nan and Guang­dong have al­ready com­pleted their tasks for 2016.

Steel over­pro­duc­tion is not an is­sue for just one coun­try; go­ing by glob­al­iza­tion rules, it’s the con­cern of all coun­tries. In fact, G20 lead­ers at Hangzhou agreed steel over­ca­pac­ity is a global is­sue and called for the es­tab­lish­ment of a global fo­rum for mem­bers of the G20 and the Or­ga­ni­za­tion for Eco­nomic Co­op­er­a­tion and De­vel­op­ment to share in­for­ma­tion and work to­gether to re­solve the is­sue.

As the host of the Hangzhou sum­mit, China has main­tained com­mu­ni­ca­tion with the par­ties to help ad­vance the prepara­tory work for the es­tab­lish­ment of the fo­rum. China is will­ing to work with the United States to re­solve the global steel over­ca­pac­ity is­sue. Trump has said he would push for $1 tril­lion spend­ing on in­fra­struc­ture con­struc­tion in the next 10 years that would in­clude build­ing and re­pair­ing high­ways, bridges, air­ports, schools and hos­pi­tals. Since the US can­not pro­duce enough steel to meet that sort of de­mand, it can buy some of the steel needed from China. This will not only ease the world’s steel over­pro­duc­tion pressure, but also boost the eco­nomic re­cov­ery of the US and other coun­tries. Be­sides, the China-led Belt and Road Ini­tia­tive (the Silk Road Eco­nomic Belt and 21st Cen­tury Mar­itime Silk Road) is ex­pected to strengthen con­nec­tiv­ity and in­fra­struc­ture con­struc­tion among coun­tries along the routes and thus boost global steel de­mands. Hope­fully, the US and other steel-pro­duc­ing coun­tries will aban­don their prej­u­dices to­ward China and try to sin­cerely re­solve the global steel over­pro­duc­tion is­sue. Only when more coun­tries make co­or­di­nated de­ci­sions and strengthen their pol­icy com­mu­ni­ca­tions can they elim­i­nate steel over­ca­pac­ity and achieve win-win re­sults.

The au­thor is a re­searcher at the In­ter­na­tional Trade and Eco­nomic Co­op­er­a­tion In­sti­tute of the Min­istry of Com­merce.


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