September 6, 2016

More Than 19,000 U.S. Steel Workers Face Layoffs Due To Steel Overcapacity, But What Is The Administration Doing?

According to a new report issued by the Duke University Center on Globalization, Governance and Competitiveness and highlighted by the Alliance for American Manufacturing, Chinese steel capacity driven by “state subsidies and strong government incentives” accounted for “nearly half of the world’s steel overcapacity in 2015.” The report estimates more than 19,000 American steelworkers are currently facing layoffs because of China’s predatory practices. 

The report also said:

  • Even though China has acknowledged that overcapacity is a problem and “has made repeated commitments” to address it, the government hasn’t kept these promises;
  • Other counties, including India, are planning to make investments that will exacerbate the overcapacity problem in future years;
  • Trade enforcement is a first step to addressing overcapacity, but “more tools are needed to combat” the problem; and
  • China is not a market economy and the United States must stand firm and not allow China to achieve market economy status from the World Trade Organization.

President Obama did not mention Chinese steel overcapacity in his opening remarks before a bilateral meeting last week with Chinese President Xi Jinping. A summary of the bilateral meeting, however, did say the two presidents discussed “China’s role in addressing industrial excess capacity, including in the steel and aluminum sectors, as part of a global effort.” (The White House did not offer any other details of the discussion.) 

In a letter sent to President Obama before his trip to China, members of the U.S. House Steel Caucus urged the president to address the “illegal trading practices of China and the growing global steel overcapacity crisis.” The lawmakers said the president’s efforts “must include proactive, aggressive enforcement of America’s trade remedy laws” and “seeking international consensus to holding Beijing to its word that it will take swift steps to reduce excess overcapacity.” As a member of the Manufacturers for Trade Enforcement coalition, MSCI strongly supports such measures.