NEW YORK China has abandoned its program of liberalizing the countrys economy by opening it to free market forces, the American Iron and Steel Institute wrote in a Sept. 20 letter to the office of the U.S. Trade Representative (USTR), alleging that China continues to injure U.S. producers by subsidizing its steel industry.
China continues to massively subsidize its steel industry, manipulate its currency and transship its products through third-party countries to avoid U.S. duties, the AISI wrote in response to the USTRs request for public comment.
"What weve seen is that in the decade since China joined the World Trade Organization, China has diverged from its path of economic reform back to an increased emphasis on state intervention and state control," AISI senior vice president of public policy, general counsel and secretary Kevin Dempsey told AMM Sept. 20. "The (Chinese) steel industry has always been dominated by state control, and earlier efforts where we thought there was going to be some liberalization have stopped, and weve gone backwards."
The U.S. trade deficit with China has risen dramatically in the past three years. From 2009 to 2012, the U.S. deficit of steel in steel-containing goods increased to 7 million tons from 4.8 million tons, according to AISI.
Chinas annual steel production has grown to more than 700 million tonnes in 2012 from around 130 million tonnes in 2000, while annual U.S. steel production decreased to 89 million tonnes from around 100 million tonnes over the same period, according to World Steel Association Data.
Chinas advantage over the United States is largely due to the Chinese governments subsidization of entire industry sectors, Dempsey said.
"State-owned enterprises have a greater chance of getting subsidies. They can count on state funding to keep going. They dont have the same pressure that private enterprises do to make a profit," he said in a presentation at the American Wire Producers Associations Government Affairs Conference Sept. 19. "They can dump, they can operate on a non-market driven basis because they have the support of the government."
More than 95 percent of the top 20 steel producers in China are state owned, either by the central government or by provincial and municipal administrations, AISI data show. A 2007 report by such parties as the AISI and Steel Manufacturers Association identified $52 billion in government subsidies to Chinese steel companies, but said the actual total is likely much higher.
China has capitalized on its trade advantage by manipulating its currency and evading anti-dumping and countervailing orders, Dempsey said.
The United States has several forums to combat unfair Chinese trade practices, he told AMM, including addressing currency manipulation at Trans-Pacific Partnership (TPP) talks, which could serve as a model for dealing with China even though the nation isnt party to those talks.
Bills addressing currency manipulation have been filed in both U.S. houses of Congress. Meanwhile, 230 members of the U.S. House of Representatives have signed a letter favoring disciplines on currency manipulation in the TPP, while a majority of the U.S. Senate backs a similar letter.
Chinas economic growth has slowed since 2010, with 2012 showing the slowest gross domestic product growth since 1999, at 7.8 percent, World Bank data show. As demand for steel in China wanes but overcapacity remains at 200 million to 300 million tonnes, the United States could continue to be a target for Chinese steel.
"Europe is in a recession, China is still growing much faster than we are but theyre not growing quite as fast as they had projected, so they are overshooting how much steel theyre producing. That creates a lot of excess capacity and excess supply," Dempsey said. "One can expect that at least some of that is going to find its way to the U.S.; we are very concerned with that."
The USTR will use the AISIs letter in a report to Congress.