US should use co­op­er­a­tion over trade fric­tion

... the two sides should share their ex­pe­ri­ences and lessons to over­come the steel over­ca­pac­ity prob­lem ...

China Daily (Latin America Weekly) - - Views - The au­thor is an as­sis­tant re­search fel­low at the Chi­nese Academy of In­ter­na­tional Trade and Eco­nomic Co­op­er­a­tion.

Given that Bei­jing and Washington have agreed that steel over­ca­pac­ity is a global prob­lem which re­quires a global so­lu­tion, China’s ef­forts to cut steel over­ca­pac­ity, a re­quire­ment of its do­mes­tic sup­ply-side re­form that could also re­duce trade fric­tions, should be ap­pre­ci­ated by the United States and the Euro­pean Union.

In April, US Pres­i­dent Don­ald Trump signed an ex­ec­u­tive mem­o­ran­dum ask­ing the Department of Com­merce to launch an in­ves­ti­ga­tion to de­ter­mine whether for­eign im­ports of steel com­pro­mise US na­tional se­cu­rity. And in Au­gust, se­nior ex­ec­u­tives from 25 US steel and steel-re­lated com­pa­nies wrote a let­ter to Trump, say­ing the in­dus­try is suf­fer­ing the con­se­quences of gov­ern­ment in­ac­tion as the Com­merce Department probe lan­guishes and im­ports surge back to pre­vi­ous lev­els, and asked him to set a limit on iron and steel im­ports, and im­pose more tar­iffs on such im­ports.

The US is the world’s largest im­porter of iron and steel prod­ucts. On the other hand, thanks to the rapid devel­op­ment of its iron and steel in­dus­try over the past decades, China has be­come the largest pro­ducer and ex­porter of iron and steel prod­ucts. But that doesn’t mean Chi­nese ex­ports are the root cause of the US iron and steel in­dus­try’s prob­lems.

US im­port and ex­port sta­tis­tics show that the coun­try im­ported iron and steel prod­ucts mainly from coun­tries such as Canada, Brazil, the Repub­lic of Korea, Mex­ico, Rus­sia, Ja­pan and Ger­many. China doesn’t even fig­ure on the list of top 10 iron and steel ex­porters to the US. Be­sides, China’s iron and steel ex­ports to the US have been drop­ping through the past decade be­cause of stricter US anti-dump­ing and an­ti­sub­sidy mea­sures.

Last year, China ex­ported only 1.18 mil­lion met­ric tons of steel to the US worth $1.7 billion, down 51.5 per­cent and 40.1 per­cent year-on-year. And ac­cord­ing to China Cus­toms’ data, the iron and steel prod­ucts China ex­ported to the US ac­counted for only 1.4 per­cent of its to­tal ex­ports from Jan­uary to July this year.

So, it’s nei­ther fair nor ob­jec­tive to blame China for the global steel over­ca­pac­ity. Eighty-six per­cent of China’s iron and steel pro- duc­tion is to meet do­mes­tic de­mand, and it does not only dis­cour­age steel ex­ports but also has adopted a se­ries of mea­sures to con­trol such ex­ports, in­clud­ing im­pos­ing tar­iffs on some types of steel prod­ucts. China has shown its de­ter­mi­na­tion to re­solve the steel over­ca­pac­ity is­sue and made re­mark­able achieve­ments.

From 2011 to 2015, China cut more than 90 mil­lion tons of out­dated steel ca­pac­ity, and plans to re­duce it by 100-150 mil­lion tons from 2016 to 2020. Hence, US re­stric­tions on steel im­ports may cause more wor­ries for its al­lies such as Canada, the EU and the ROK.

The EU, how­ever, has said that if Trump builds a trade bar­rier against steel im­ports, it would file an of­fi­cial com­plaint with the World Trade Or­ga­ni­za­tion. Cal­cu­lat­ing the gains and losses if Trump were to stick to his pro­tec­tion­ist course, as­so­ci­a­tions such as the Amer­i­can Au­to­mo­tive Pol­icy Coun­cil and Na­tional For­eign Trade Coun­cil said that higher tar­iff on steel im­ports would cause do­mes­tic steel prices to rise, which in turn would in­crease the pres­sure on en­ter­prises, au­tomak­ers for ex­am­ple, which use steel as raw ma­te­rial. In fact, Trump’s move will fur­ther erode the core com­pet­i­tive­ness of the US’ man­u­fac­tur­ing in­dus­try, while giv­ing its trade part­ners enough rea­son to pay back at the op­por­tune mo­ment.

In sum­mary, since China and the US have more com­mon in­ter­ests than conflicts, co­op­er­a­tion is the best way to re­solve any is­sue. There­fore, the two sides should share their ex­pe­ri­ences and lessons to over­come the steel over­ca­pac­ity prob­lem and work to­gether to cre­ate more fa­vor­able con­di­tions for the steel in­dus­try to pros­per in the fu­ture.

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