“Thank you for holding this important hearing. I hope the Administration will reach the following five conclusions after hearing from the many witnesses today and tomorrow.
“First, without question, the steel industry today faces a true crisis. As Nucor CEO and President John Ferriola has put it, “This is much worse than the steel crisis of the late 1990s, when nearly two-thirds of the U.S. steel industry went into bankruptcy." Over 12,000 American steelworkers lost their jobs last year - and many more will surely lose their jobs if we fail to act.
“Second, this is a global problem, involving practices in a number of economies. Most of the overcapacity today originates in just one country -- China. The numbers are staggering. In the year 2000, China’s steel capacity was just over 100 million tons, roughly the same as the United States. Today, it is 1.2 billion tons - more than 10 times as high as U.S. capacity - and more than the total capacity of the United States, the European Union, Japan, and Russia combined.
“Third, the problem in China largely results from excessive Chinese government intervention in its economy. The Chinese steel industry is largely state-owned and state-supported, and the economy is distorted in a myriad of ways. Chinese steel companies do not operate according to market conditions, instead operating based on decisions made by local Chinese officials with mandates to satisfy economic growth targets. Beyond having the express backing of their governments, many steel producers in China receive market-distorting subsidies and government-supported export incentives that have been mimicked by other countries attempting to ensure that their domestic steel industry remains competitive. Further, there are numerousreports concerning growing labor unrest in China in response to Chinese SOEs refusing to pay their employees’ salaries. How is a United States steel manufacturer supposed to compete with a government-backed Chinese competitor that can simply choose not pay its workers’ wages if the steel it produces does not sell?
“Fourth, we need to act forcefully and immediately to address the global overcapacity problem. Commentators who are wedded to outdated economic theory will likely argue that we should take a “hands off" approach to this problem and let the market sort things out. But, again, the problem itself is that China is not allowing the market to operate. So, as the OECD Steel Committee Chairman put it last June: “A failure to address or halt market distortions will result in subsidized and state-supported enterprises surviving at the expense of private and efficient companies operating in environments with minimal government support."
“We need to seriously consider all options for action, including the full enforcement of our antidumping and countervailing duty laws, as well as a global section 201 safeguard action and actions at the WTO. While U.S. trade remedy laws provide some relief regarding certain unfair practices, the remedy laws do not provide relief from all unfair practices that have led to the steel overcapacity crisis. We also need to recognize simple reality: China is not a market economy today, and it would be foolish to pretend otherwise as we and our trading partners apply our trade remedy laws.
“And we must not hesitate to act, as we have too often in the past. Indeed, our reluctance to act in the past likely only contributed to the current problem. Our government refused to apply the “China safeguard" time and time again in the 2000s. Most significantly, we were too squeamish about taking strong action to address China’s currency manipulation. Our unwillingness to act only emboldened China’s state planners - and contributed to the loss of millions of U.S. jobs, as recent economic studies have found.
“Finally, while I hope our efforts will ultimately result in an international agreement, we need to be clear-eyed about what it will take to get other countries to come to the table, and about what an agreement should look like. Countries with massive overcapacity issues won’t come to the table if they think the alternative to an agreement is more or less the status quo. And, if we are able to reach an agreement, it needs to be binding and verifiable. We need to have confidence not only that the agreement is enforceable, but that it will be enforced.
“In that regard, we need to take with a grain of salt China’s announcements that it intends to reduce its capacity by 100 million to 150 million tons. Those numbers are far too modest, given that China’s capacity has increased by about a billion tons over the past 15 years. In any event, promises like this in the past have proven hollow. We need a much stronger, immediate and binding commitment from China."
