A Case Study in Global Imbalances
By John Surma
October 28, 2009 - 11:22am ET
The kind of global economic stress we are experiencing is bound to create tensions within the world trading system. Understandably, every company is working to improve its own position. But in countries and regions that are unconstrained by the due process requirements of the U.S. justice system, we have seen signs of trade actions that seriously undermine the global steel market. Nowhere are these destabilizing actions more apparent than in China.
China, of course, is by now the world’s largest steel producer, and market-driven companies like U. S. Steel are competing with what amounts to a coordinated, national enterprise. Because of its size, and its system, the Chinese steel industry has the potential to be very disruptive to our global industry.
As U. S. producers and the United Steelworkers allege in our pending anti-dumping and subsidy filings against tubular imports from China — we believe that the subsidized steel Chinese producers flooded into the U. S. last year severely damaged the market for this particular pipe and forced curtailment in production and employee layoffs.
China continues its actions to benefit its own steel industry. Not long ago -- in the midst of the global recession— the Chinese government again took action, this time by raising its Value Added Tax export rebates on a wide array of flat, long and tubular products. Since the U. S. has no system of VAT rebates to stimulate exports, and because we agreed to zero import duties on steel mill products in the Uruguay Round, American producers, in particular, stand to be harmed by these trade-distorting actions — which, by the way, China took characteristically without any transparency in process or policy. Over the summer, in a welcome step, the U.S. Trade representative initiated WTO action against China over export restrictions of certain raw materials, in clear contravention to its agreement upon accession to the world body.
The U. S. is not alone in our concern that unfairly-traded steel from China threatens the world market. Just in the last year, producers from Australia, Canada, the European Union, India and Russia filed trade actions against steel imports from China.
Make no mistake, as with any sovereign nation, China is free to develop its industrial capacity according to its economic plan and to set policies affecting pricing, volumes, capital investment, environmental regulations, labor standards and anything else. As long as the products produced by that system stay inside its planned economy, we have no basis to comment or object, and we wish China well in its long-term economic development plan. But when a product of that system enters the global market, we do have a basis to comment or object and we believe China must comply with the rules.
John Surma is chairman and chief executive officer of United States Steel Corporation.
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