[author: Adriana D. Groot]
Hearings held by the U.S. Trade Representative (USTR) and Congressional Steel Caucus during April 12-14 provided a direct look at how steel overcapacity in foreign countries has drastically affected the domestic steel industry in the United States. Domestic producers, trade associations, political leaders, and workers came from all over the country to share their stories and offer up solutions on how to address what some are calling a global crisis.
According to testimony presented at the hearing, during the past couple of years, there has been a significant shift in the international steel industry. While U.S. steel production decreased 10% last year, China’s steel production has continued to increase. Today, China is producing over 800 million metric tons of steel per year. Despite expressed plans to decrease steel production, Chinese steel producers’ exports increased 30% in March compared to exports last year. All of this overproduction of steel has led China to dump its excess steel well below market price in the U.S. and other foreign countries. China continues to boost its steel production through government intervention in the form of market-distorting subsidies and government-supported export incentives. In an effort to stay competitive in an unfair market, foreign countries have begun to take the same approach as China, creating a disastrous domino effect. Because of this, the U.S. steel industry has suffered severe injury, with the closing or idling of several production facilities and more than 13,000 employees laid off. These direct impacts to the steel industry have also led to layoffs and closures in downstream businesses that continually rely on these producers.
During the hearings, those testifying provided some suggestions on how to address this growing issue. All called for swift action that provides relief as quickly as possible. One common solution was a request for current trade laws to be enforced in their full capacity. This specifically applied to the Leveling the Playing Field Act and the ENFORCE Act. Among other things, the Leveling the Playing Field Act clarifies the definition of material injury that companies must suffer to receive trade relief and strengthens the ability of the Department of Commerce and the International Trade Commission to use adverse facts available when foreign producers fail to cooperate in unfair trade investigations. The ENFORCE Act provides Customs and Border Protection with the tools needed to investigate illegal evasion of antidumping and countervailing duty orders. There were also frequent mentions of a potential Section 201 safeguard action, which, if successful, would provide tariff and/or quota relief against imports from all countries, whether unfairly traded or not. This would involve an investigation by the International Trade Commission and a final decision by the President on how to remedy the injury caused by the surge in imports. The United States Secretary of Commerce, Penny Pritzker, has said a Section 201 investigation “would require enormous input from the industry” before moving in that direction.
In addition to enforcing existing laws, many have expressed the importance of establishing an international agreement with countries that are also affected by steel overcapacity. The Organization for Economic Cooperation and Development (“OECD”) has begun hosting High Level Meetings on Excess Capacity in an effort to obtain international commitments to help reduce existing excess capacity. The U.S. is also pursuing cases at the World Trade Organization to hold China accountable for their alleged trade violations.
Finally, there was a general consensus among the hearing witnesses that China is not a market economy and should not be granted market economy status under U.S. antidumping law in 2016. Granting market economy status would require authorities to presume all of China’s prices and costs are market determined. Critics have demanded that China make significant changes to its economy and trade practices, including calls to cease its alleged currency manipulation, before the United States can consider granting it market economy status for purposes of antidumping duty determinations.
The global steel hearings provided substantial insight into how the steel industry has been adversely affected by overcapacity in foreign countries and what this could mean for the industry’s future. The government officials in attendance expressed support for the industry and a willingness to use all available tools to prevent further adverse consequences for the industry and its workforce.
