In China-US steel trade, cooperation beats friction

By Bai Ming Source:Global Times Published: 2017/7/17 19:58:40

Illustration: Peter C. Espina/GT

After the G20 summit in Hamburg, Germany, announcements from China and the US said that they would hold the first round of the China-US Comprehensive Economic Dialogue (CED) on Wednesday. The talks will take place in Washington.

Coming after the meeting between Chinese President Xi Jinping and US President Donald Trump at Mar-a-Lago in Florida, the Sino-US 100 Day Action Plan which ended on Sunday has achieved many positive results. Against this positive backdrop, the CED will focus on longer-term bilateral concerns such as steel trade friction.

Since Trump took office earlier this year, his administration has taken protective measures one after another, and he's shown his eagerness to address the trade deficit with China.

In February, the US Department of Commerce made a final ruling on anti-dumping and countervailing investigations of China-produced stainless steel sheet. It imposed anti-dumping tariffs of 63.86 percent to 76.64 percent and countervailing duties of 75.6 percent to 190.71 percent on Chinese enterprises. China's iron and steel exports to the US have continued to decline because the US has levied high tariffs on China's iron and steel enterprises. I believe that US pressure against Chinese iron and steel enterprises may ease in the short term, but under the influence of Trump's policy to revitalize the US manufacturing sector and internal pressure from the US iron and steel industry, China's steel sector may still face long-term US pressure.

Given this situation, a win-win outcome for bilateral trade is much better than resorting to trade friction.

First, frequent friction is detrimental to bilateral common interests. Specifically, the extreme pressure from the US on China is contrary to the relevant provisions of the WTO. High tariffs in the US have forced some Chinese steel products out of the US market and seriously affected China's iron and steel enterprises' exports.

More generally, such US practice is a serious violation of WTO rules. In the long run, the US government's trade protectionism weakens the competitiveness of the US steel industry, and it doesn't suit overall US national interests.

In addition, under Article 232 of the Trade Extension Act of 1962, the US Department of Commerce announced in April that it would start an investigation of whether steel and aluminum product imports threaten and undermine US national security.

Many other countries are also worried about the evident protectionism of the US, and this situation is likely to make other countries dissatisfied with the US - and this is not in the US' interests.

Continued declines of China's steel exports to the US will reduce the income of China's steel industry, at least in the short term. As to the long term, declines will block the growth potential of China's steel enterprises and narrow the scope for Sino-US trade cooperation.

Second, China and the US have specific advantages. From the perspective of the iron and steel sectors, China has a strong price advantage in commodity products, while for advanced and specialized products, the US has superiority. For the past 20 years, the US iron and steel industry has been regarded as a sunset industry, but excessive government protection has led to a lack of innovation among iron and steel companies in the US. It would be more effective if US companies in these sectors focused on becoming more competitive, rather than relying on excessive protectionism and trade sanctions.

Third, global problems require global solutions. Overcapacity is a global issue caused by the unsatisfactory global economic recovery, weak demand and other factors. It is not solely caused by China, so it requires multilateral dialogue and consultation from countries around the world.

China is actively taking steps to resolve overcapacity. China has said that it will vigorously accelerate supply-side structural reform, regulate the relationship between supply and demand and aim to reduce crude steel capacity. In addition, China actively promotes the "Belt and Road" initiative, which will benefit global output building and help countries with low steel output such as Kazakhstan.

China and the US should make full use of their respective strengths to cooperate and solve the problems facing both sides.

The author is a research fellow at the Chinese Academy of International Trade and Economic Cooperation.


blog comments powered by Disqus