Nine steel associations from around the globe have released a joint statement voicing their concern over China’s attempt to gain market economy status by December 2016.
The American Iron and Steel Institute (AISI), the Steel Manufacturers Association (SMA), the Canadian Steel Producers Association (CSPA), The Mexican Steel Association, the Latin American Steel Association, EUROFER (the European Steel Association, Instituto AcoBrasil, the Speciality Steel Industry of North America, and the Committee on Pipe and Tube Imports have all signed up to the statement.
The statement recognises China’s leading role in the current global overcapacity crisis and quotes figures issued by the OECD Steel Committee indicating that, globally, there is almost 700Mt of excess steel capacity.
According to the nine associations, China’s state-owned and state-supported steel industry has an overcapacity ranging from 336 to 425Mmt (million metric tonnes) and is expected to grow over the coming years.
“This situation, together with a declining steel consumption, has resulted in record levels of steel exports from China to the rest of the world in 2014 – and which are on track to exceed 100 million metric tons this year,” according to a joint press release issued 5 November 2015.
China believes it should be automatically accorded market economy status after the 15th anniversary of its accession to the World Trade Organisation, which is on 16 December 2016.
However, the nine steel associations believe that governments are not obliged to treat China as a market economy on and after 16 December 2016.
“While one small part of Section 15 of China’s Protocol (subparagraph 15 (a) (ii)) expires on December 11, 2016, the remainder of Section 15 will remain in effect. These remaining provisions allow WTO members to treat China as a non-market economy country unless the Government of China or Chinese producers can show that they operate under market economy conditions,” the nine steel associations have argued.
It is argued that China ‘remains very much a non-market economy’ when the Chinese government’s ‘significant role’ in many key aspects of the Chinese economy – including its state-owned and controlled steel sector – is there for all to see.
“For the steel sector, recognition or treatment of China as a market economy at the end of 2016 would coincide with the peak of Chinese excess steelmaking capacity, and record levels of exports to international markets, including the US, the EU and Latin America,” the nine associations claim.
It is argued that premature recognition of China as a market economy would have enormous economic and social impact. “We urge governments around the world to undertake a comprehensive assessment of the continuing role of the state in the Chinese economy and industry, as well as an assessment of the impact on industries around the world, if China were to be treated as a market economy before it made the necessary reforms to ensure that market forces were in fact allowed to operate fully in the Chinese economy,” they say.