Emerging nations endanger G20’s efforts
THE GROUP of 20’s (G20) effort to eliminate the world’s steel glut will face a major obstacle if developing countries resist attempts to curtail government subsidies to local producers, according to the outgoing chief of the Organisation for Economic Co-operation and Development’s (OECD) steel committee.
Excess supply in China is spilling on to world markets, sparking protectionist measures, and drawing attention from leaders. One hurdle to overcome could be the unwillingness of emerging nations to abandon efforts to nurture their sectors through government support, said Risaburo Nezu, the OECD chairman.
The OECD was facilitating the G20’s forum to tackle overcapacity, with the steel glut high on the agenda at their summit in Hangzhou.
Although developing nations were suffering from the flood of cheap Chinese metal, the forum could see a faction emerge that wanted “to nurture the steel industry via government funding”, Nezu said.
“It’s never easy to resolve this issue,” he said, referring to the new forum. “Many difficulties lie ahead.”
Despite China’s commitment to reduce its capacity by up to 150 million tons before 2020, regulators have argued that Beijing had not done enough to curb its subsidies. However, the G20’s communiqué eschewed finger-pointing at Beijing and instead described overcapacity as a “global issue, which requires collective responses”.
Excess capacity
Still, advanced nations wanted to eliminate subsidies or any other forms of support from the state that distorted markets and contributed to excess capacity, Nezu said.
Meanwhile, China’s production showed little sign of letting up. The latest data following the G20 summit showed last month’s output rising 3 percent from a year earlier as mills fired up capacity to capture more profits from a surge in prices. Exports remained elevated and the campaign to cut overcapacity was falling short, with less than half of this year’s target met by July.
Nezu has announced that he is stepping down from his post on the OECD’s steel committee and handing the reins to Ronald Lorentzen, the deputy assistant secretary for import administration at the US Department of Commerce, he said. Nezu, who earned an MBA from Harvard Business School, is a former Japanese bureaucrat at the country’s trade ministry. – Bloomberg