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July 18, 2016

MSCI Meets With Congressional Steel, Aluminum Caucuses In Washington, DC Regarding China

Last week, as part of the Manufacturers for Trade Enforcement (MTE) coalition, the Metals Service Center Institute (MSCI) participated in a briefing with staff members from the U.S. House of Representatives steel and aluminum caucuses. The MTE coalition includes more than 20 trade associations, representing more than one million U.S. workers, that are united in opposition to the automatic granting of market economy status for China from the World Trade Organization (WTO) at the end of 2016. 

Members of the coalition began last week’s session by arguing to the legislative staff present that they can stop this move and that any argument that China must automatically receive market economy treatment after 2016 is contradicted directly by language in China’s WTO Protocol. 

Coalition members also argued it is clear that China is not a market economy based on four factors:

  • There is state control over many critical aspects of the Chinese economy, including key strategic industries;
  • China places significant restrictions on foreign investment;
  • The Chinese financial system remains dominated by state-owned banks, and the stock and bond markets are dominated by State Owned Enterprises; and
  • China’s currency remains controlled by the government and is undervalued to favor exports and discourage imports.

Coalition members also illustrated the devastating effects granting market economy status to China would have on U.S. industry and the U.S. economy. For example:

  • Antidumping laws would be less effective for remedying injury, as dumping margins would likely be zero/close to zero;
  • NAFTA steel imports would increase by $17.4 billion while intra-NAFTA steel trade would fall;
  • NAFTA steel industry output would shrink by $31.5 billion;
  • NAFTA economic welfare would decrease by $42.5 to $68.5 billion;
  • There would be significant declines in economic welfare and GDP, as much as $47 billion;
  • U.S. steel imports would increase by $13.3 billion and output would decline by $21.1 billion;
  • The U.S.’s $12.1 billion aluminum industry would lose access to vital trade enforcement tools as Chinese imports increase dramatically; and
  • U.S. labor demand would decline by as much as $30 billion, meaning job losses of 400,000 to 600,000 workers in steel and other industries.

Members of the coalition also illustrated how the recent surge in Chinese aluminum production is driven by government subsidies and noted that, rather than cutting back production, China has flooded the U.S. market with its excess steel at below-market prices, harming U.S. producers and workers. (In 2015, China exported 112 million metric tons of steel to the world, a 20 percent increase over an already record-setting 2014.) 

The coalition ended last week’s session by telling the staff present that their bosses, the members of the U.S. House steel and aluminum caucuses, could help by making it clear to the U.S. Department of Commerce that the executive branch should forcefully oppose China’s efforts to gain market economy status. 

To learn more about this issue, check out the MTE coalition’s website, which includes a helpful video explaining China’s efforts to attain market economy status. 

As Politico reported last week, China agrees with the claim that the decision to grant it market economy status is not automatic. (Specifically, Politico said the Chinese have agreed with the United States’ argument that World Trade Organization members “don't have to grant the Asian country market economy status by the end of the year.”) Instead, the Chinese have argued WTO members must “provide the benefit of that designation by changing how they calculate anti-dumping duties on Chinese goods.” 

In related news: last week the Office of the U.S. Trade Representative announced that the United States will launch a WTO case challenging China’s export duties on nine raw materials, including copper, lead, graphite, cobalt, and tin.