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232 could drive global effort vs. overcapacity

Jul 05, 2017 | 10:20 AM | New York | Grace Lavigne Asenov

Tags  Section 232, Kevin Dempsey, American Iron and Steel Institute, AISI, steel imports, infrastructure, Nafta, tax reform Grace Lavigne


The Section 232 investigation into steel imports could be the spark that ignites a more proactive global movement against steel overcapacity, American Iron and Steel Institute senior vice president of public policy, general counsel and secretary Kevin M. Dempsey said.

The Global Forum on Steel Excess Capacity, created by the Group of 20 (G20) world economic powers, has been useful, “but it’s clear that it by itself is not going to provide the catalyst to take action on a global scale,” he said.

“Hopefully 232 can help jumpstart a more activist global effort,” Dempsey told AMM during a recent interview in New York. “The underlying issue of overcapacity is centered on China ... and that’s not just a US concern. We need more countries around the world exercising their rights with the (World Trade Organization) to address dumped and subsidized imports coming from China.”

Dempsey “doesn’t put a lot of credence” in the notion of 232 starting a trade war, he said. “Any time there is talk of any kind of trade relief, there’s always people saying ‘This is going to trigger a trade war.’ ... The (overcapacity) situation is so dire that we have to address it. There needs to be some action.”

An ideal outcome from 232 would be a solution that encompasses the entire steel value chain and addresses secondary effects such as circumvention, he said. Steel mill utilization rates should preferably be around 85% vs. the 74.4% recorded year to date through June 24 to support a sustainable industry, Dempsey said.

“If there’s more relief imposed, the domestic steel industry has plenty of capacity to produce additional steel products,” he noted. “There should be no concern about a lack of adequate supply of steel.”

In terms of domestic policy, AISI is hopeful that President Donald Trump's administration will tackle tax reform and increase infrastructure spending in the near term, according to Dempsey.

There is a “good chance” that those two policies could be linked together, he said, pointing to the need for additional revenue streams to support increased infrastructure spending. A one-time repatriation of overseas profits, or increased user fees such as a hike in the federal gas tax, should be part of that solution, he said.

Regarding public or private infrastructure funding, “there’s room for capital from all sources,” Dempsey said. However, roads and bridges in rural US areas, for example, will still need public support as they likely wouldn’t attract most private investors, he said.

“We still need a strong public infrastructure system,” Dempsey said. “There’s a need for public investment and plenty of room for private investment too.”

“We’d like to see that process move forward more quickly than it has,” he said of legislation for tax reform and infrastructure, citing higher steel imports. “That would be an important bill or series of bills for the steel industry.”

As for the potential renegotiation of the North American Free Trade Agreement (Nafta), “We think it’s been a very successful agreement for the steel industry. We’ve strengthened the supply chains in some key industries like automotive in North America that has allowed us to compete against competitors in other parts of the world. We want to keep that, and update and strengthen it,” Dempsey said. 

Indeed, AISI president and chief executive officer Thomas J. Gibson on June 27 testified on Nafta modernization as part of the interagency hearing of the U.S. Trade Representative. AISI hopes that Nafta renegotiations will lead to updated rules of origin and regional value content requirements, better trade enforcement, enforceable currency disciplines, disciplines on the conduct of state-owned enterprises, improved customs procedures and upgraded border infrastructure.

Grace Lavigne


 

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