China to end subsidies on steel exports

The United States and China have reached an agreement where China will end its subsidies on steel exports, which enable them to undercut American steelmakers on price and led to more than 1,000 steelworker layoffs in Northwest Indiana last year.

China exported more than 112 million tons of steel last year, more than the United States can even produce. Chinese companies were often able to sell steel abroad at a loss because they received heavy government subsidies, such as having the Communist government pay the entire power bills for steel mills.“

Today we have signed an agreement with China to eliminate export subsidies that the United States challenged because they are prohibited under WTO rules," U.S. Trade Representative Michael Froman said. 

"This is a win for Americans employed in seven diverse sectors that run the gamut from agriculture to textiles to medical products, who will benefit from a more level playing field on which to compete."The agreement underscores President Barack Obama's commitment to aggressively enforce trade rights to secure results for American workers, farmers, and businesses, Froman said.

The deal was announced after a two-day hearing in Washington by the U.S. Trade Representative and the U.S. Department of Commerce. The United Steelworkers union and steelmakers gave federal officials an earful about the 13,500 steelworkers that have been laid off because of the global import crisis.

Froman said China has agreed to withdraw central government funding for exports, including steel and aluminum, to end preferential service agreements that enable companies to get free or discounted services, and to end cash grants for exports.“

As a result of USTR’s extensive efforts, this agreement addresses all elements of the massive and complex export subsidy program. China has now issued and provided more than 130 directives, instructions, and notices to address U.S. concerns," Froman said.

The agreement has transparency provisions that give the United States a solid basis to monitor Chinese compliance, Froman said.While subsidies are part of the problem, the steel industry says more needs to be done. Steps the industry wants to see are more vigorous enforcement of trade laws, maintaining China's non-market economy status in trade deals so tariffs aren't weakened, and securing agreements that countries around the globe will idle some of the estimated 700 million tons of steel overcapacity. They also want the U.S. government to agree to source more domestic steel and object to China's currency manipulation, which has kept prices artificially low.

More trade enforcement is needed because of the threat to national security, Congressman Pete Visclosky, D-Merrillville, said."The agreement is one good step forward; however, the agreement will not make the 700 million tons of excess global steel capacity, including China’s 425 million tons of excess steel, vanish into thin air," he said. "China continues to pose a real and constant threat to American workers and their families, and I will continue to work every day to fully enforce all of our trade laws and stop the influx of illegal steel imports."U.S. Sen. Joe Donnelly said there was reason to be wary, given China's past track record. 

"Our domestic steel industry continues to be in a crisis, harming communities across Indiana," Donnelly said. "While I took note of today’s developments, China has time and again gone back on its word and has consistently played by its own rules. I hope the Chinese government will live up to its commitment to stop illegally subsidizing steel, but until they do, I will continue to press the Obama Administration to utilize all its tools to enforce our trade laws and hold China accountable for its actions."