Group of 20 leaders agreed to address growing overcapacity and rock-bottom prices in global steel markets, bowing to pressure from the Trump administration after it threatened to impose punitive tariffs on its allies.
In talks that stretched into the early hours of Saturday, U.S. officials managed to get language inserted into the communique that sets deadlines for G-20 members to address excess steel production, according to a leaked copy of the text. Countries like China will also have to be more transparent about how they subsidize domestic producers. In return, the U.S. agreed to boilerplate language reiterating the G-20’s commitment to fight protectionism.
The threat of a trade war on steel hung over this week’s G-20 summit in Hamburg and those fears were compounded Friday when German Chancellor Angela Merkel said negotiations were proving to be difficult. That said, the statement still preserves Trump’s ability to impose harsh new steel tariffs if he determines they are warranted.
The U.S. is a net importer of steel used for construction, infrastructure and other demands. But President Donald Trump promised during his election campaign to help revive the steel industry and said the U.S. can’t take chances by relying on imports of the metal for reasons of national and economic security.
In a key passage, the G-20 communique urges world leaders to “urgently” seek the removal of “market-distorting subsidies and other types of support by governments and related entities,” according to a copy provided to Bloomberg. That was significantly stronger than the language adopted by the G-20 at last year’s summit in Hangzhou, China.
The joint statement further calls on G-20 members to “fulfill their commitments on enhancing information sharing and cooperation by August 2017, and to rapidly develop concrete policy solutions that reduce steel excess capacity.”
The data and proposed policy solutions will then be compiled into a report and published by the OECD’s Global Forum on Steel Excess Capacity in November, according to the leaked communique text.
G-20 members will take stock of their progress during Argentina’s 2018 G-20 summit in Buenos Aires, the text said.
The text represents a blow to President Xi Jinping, who has resisted Washington’s efforts to squarely blame his government for the excess capacity and depressed prices for steel products.
Despite China’s commitment to reduce the country’s annual steel capacity by as much as 150 million tons before 2020, U.S. and European regulators argue that Beijing has not done enough to curb its government subsidies for steel and other products.
The Trump administration ultimately endorsed language to fight protectionist measures and ensure reciprocity in trade and investment frameworks. It’s noteworthy that U.S. officials opposed such language at the G-20 finance ministers’ meeting in March – less than a month before Trump launched investigations to determine whether cheap international imports of steel pose a threat to U.S. national security.
In addition, the July 8 communique text recognized the right of members to apply “legitimate trade defense instruments” to address “unfair trade practices” – something that preserves Trump’s ability to impose tariffs in future.
The text comes as Brussels mulls new trade defense instruments to permit higher anti-dumping duties on exports from countries where there are “significant distortions” to free market forces.
“The European Union got everything we wanted,” an EU official said. “We were very successful in what we wanted to obtain.”
The share prices of the biggest domestic steelmakers, including Nucor Corp., United States Steel Corp. and Steel Dynamics Inc., surged after Trump’s election on expectations that the president would implement policies to reduce the amount of foreign metal coming into the country. The U.S. benchmark price for steel rose 55 percent last year, its biggest gain in at least a decade, after a slate of successful trade cases levied anti-dumping and countervailing duties against countries including China.
When a U.S. probe was launched in April, Commerce Secretary Wilbur Ross argued that China had failed to deliver on promises to reduce excess steel capacity, a situation that he said was hurting the U.S. industry. China has noted that its shipments to the U.S. are low-end steel products that local producers aren’t willing to make.
Ross originally planned to submit findings from the investigation in June, but missed the self-imposed deadline amid news reports that the administration was debating what level of tariffs to impose. Trump considered slapping 20 percent duties on steel, before deciding to soften his approach, online publication Axios reported early this month, citing unnamed administration officials.