Remarks by Ambassador Michael Froman at the Hearing on Global Excess Capacity and the Impact on U.S. Industry
Washington, D.C.
April 12, 2016
*As Delivered*
“Welcome, everyone. Thank you all for joining us. Let me also thank the ITC and its Chair, Meredith Broadbent for hosting us, as well as everyone who worked hard to pull this hearing together.
“We’re here to confront a truly global challenge. During the last 15 years, global steelmaking capacity more than doubled, while global demand growth has fallen back. A widening gap between global capacity and demand intensified after the 2008-2009 financial crisis due to continued capacity expansion and an uneven and sluggish recovery in steel demand.
“While this problem is not limited to China – capacity has grown inconsistent with demand in many emerging markets – China is obviously a big part of it. With an explosion of steel-making capability over the past 15 years, China is now home to half the global supply of steel and the principal source of the world’s overcapacity. And rising global exports from China and elsewhere have put pressure on already weak global prices. Many governments have provided subsidies and other support to expand capacity, without giving adequate consideration to market considerations or adverse trade effects.
“And as a result, workers and businesses around the world are struggling. In the United States, steel production fell 10 percent last year and capacity utilization has reached some of the lowest levels since the financial crisis. Dozens of U.S. iron and steel facilities have reduced production or idled mills, including recently in Alabama, Texas, and elsewhere.
“There are similar impacts in other countries, too. Last month, a major steel operation in Britain’s Port Talbot was put up for sale. Last week, Australia’s last commercial steelmaker announced it was going into administration. These challenges are not new, but the ability of many economies to cope with them has reached a critical point.
“While the U.S. is not immune from these pressures, we do have certain strengths. At a time of low growth and high uncertainty around the world, the U.S. economy is a relative bright spot. We’ve been growing between two and three percent per year, adding jobs every month for the last 73 months, for a total of 14.4 million net new jobs, the longest uninterrupted period of job creation in recorded history.
“Real manufacturing output has grown by over 10 percent since 2008, and by the end of last year was approaching an all-time high. Even more striking, we’ve added manufacturing jobs every single year since the crisis – six years in a row, the longest streak of continuous factory job growth since the 1960’s. We now have 845,000 more manufacturing jobs in the United States than we did in 2009, and about a third of those jobs are in the auto and auto parts sector and other sectors that are highly dependent on steel.
“And when it comes to productivity, American workers are unmatched – producing 30 percent more per worker than Germany, and three times as much as China.
“But this comeback remains incomplete, and as many of you know personally, we have more work to do. Employment has improved dramatically, but not everyone who lost a job during the crisis got a new one, and the new jobs may not pay as well as the old ones. After years of stagnation, wages are beginning to rise – 2.5 percent over the last year – but too little and too slowly. And we know that beneath the signs of strength at the national level, there is a diversity of experience from community to community.
“That’s why today’s hearing is so important. We’re going beneath the aggregate statistics and hearing individual stories. We’re going to hear what these challenges mean for factories and towns, workers and their families. We’ll hear from manufacturers, workers, suppliers, customers, economic experts and community leaders. They’ve come in from across the country: from Virginia, from Pennsylvania and Ohio, from Oklahoma, Texas, and Oregon. Thank you all for making the trip to be here today.
“We’re also fortunate to have bipartisan, bicameral representation from Congress here today. This is a problem that affects a broad range of sectors, it affects steel, it affects aluminum, it affects solar panels, and many others. That’s why we’ll also hear from representatives from the aluminum industry, as well as downstream industries that rely on strong domestic steel production to meet their consuming needs.
“This hearing will inform the full range of work we’re doing on behalf of American workers and businesses. Our commitment to these issues extends to the very highest level and we’re focused on everyone who is affected: manufacturers, workers, their families, and communities.
“This is not a new area of focus for us. More than a year ago, long before steel closures were dominating the front pages of newspapers around the world, Secretary of Commerce Penny Pritzker and I went to the Chinese leadership and said we needed to have a conversation about China’s overcapacity. We brought in experts from the U.S. and China and made it clear that this was a problem that was going to have to be dealt with. From the President on down there has been direct engagement with Chinese government officials on excess capacity on an ongoing basis.
“We’ve been working on these issues from all angles, standing up for our steelworkers and our aluminum workers time and again.
“We’ve ramped up enforcement, significantly increasing the rate at which the U.S. brings cases against China – including 11 WTO complaints since 2009. We’ve brought successful cases against China’s export quotas and duties that artificially increase world prices for steel inputs and lower prices for Chinese producers; against China’s AD/CVDs on grain-oriented electrical steel; against China’s unwarranted AD/CVDs on American cars and SUVs; and against China’s export quotas and duties raw materials used in numerous products made with aluminum and steel components.
“And we’re continuing to press for progress, with ongoing challenges to Chinese export subsidies to enterprises in the steel sector and to a trade distortive Chinese export subsidy program for auto and auto parts enterprises.
“Under the auspices of the Commerce Department and the ITC, we now have 149 anti-dumping and countervailing duty orders in place against foreign steel. Taken together, our enforcement wins over China and our many other trading partners are worth billions of dollars for American farmers and ranchers; manufacturers, and automobiles workers; cutting edge service providers; and many others.
“We have not only used every tool at our disposal, and for years, we’ve worked to upgrade America’s enforcement toolbox. And we’ve done so by taking a broad, stakeholder-based approach, working closely with industry, labor unions, and Congress.
“In 2012, in the State of the Union Address, President Obama announced the creation of the Interagency Trade Enforcement Center (ITEC) – a first-of-its kind body dedicated to investigating international trade abuses. That effort has allowed us to bring together expertise from around the government – including language expertise, subsidies expertise, and sector expertise – under a single roof at USTR. ITEC has helped us launch new, more systematic and more complex cases that are helping level the playing field for American workers.
“Last month, the President signed a customs bill that codifies into law that interagency approach. More importantly, that bill also increases our trade enforcement authorities and resources and gives us new tools to deal with currency manipulation. Earlier, in 2015, the President signed the Level the Playing Field Act, which closed loopholes in our AD/CVD law and codified important Department of Commerce practices, providing support to domestic industry users of these laws, including workers and businesses in the steel industry. A number of members of Congress who are expected to be here today were critical to that bill becoming law.
“Recognizing that this is a global problem that requires a global solution, we’ve been working to build coalitions around the world. We’re working with allies and partners, including Canada, Mexico, Japan and the United Kingdom, to seek commitments from key producer countries on capacity and production reductions. Next week, Deputy USTR Robert Holleyman and Under Secretary of Commerce Stefan Selig will lead a government and industry delegation to the OECD High-Level Meeting on Excess Capacity to seek an international commitment to help reduce existing excess capacity.
“At the same time, we’re using every bilateral mechanism to press China for progress, which has been insufficient to date. At last year’s Joint Commission on Commerce and Trade, we obtained a commitment to intensify our excess capacity discussions on steel and aluminum. As part of that commitment, we’ll hold a JCCT steel industry and government dialogue next month here in Washington. In meetings with Chinese counterparts in February and in late March, we emphasized the need for China to act more aggressively in addressing steel excess capacity and counteracting the effects that rising Chinese exports are having on U.S. and global markets.
“While we express our willingness to work closely with China on this issue as cooperatively as possible, we’ll also remain clear that they cannot shift their excess capacity onto global markets without serious trade responses. This will be a persistent theme of our engagement with China going forward, as we approach the Strategic and Economic Dialogue meeting this summer.
“What’s clear, though, is that aggressive enforcement efforts and international engagement, while absolutely necessary, are not entirely sufficient. Our MFN tariffs on steel imports are zero, and have been since the mid-1990s. Our market is open, so we need to raise standards in other countries and tackle emerging issues. We need to update and improve the “rules of the road” on trade, including rules for state-owned enterprises, which are fairly prevalent in the steel and aluminum sectors of many economies.
“And we need to develop additional tools to get at the roots of this problem.
“That’s why, for example, the Trans-Pacific Partnership, or TPP, is the first trade agreement with disciplines on state-owned enterprises. These disciplines go beyond existing trade laws, including broad anti-discrimination, transparency and subsidies rules. By passing TPP, we can ensure that if foreign governments subsidize and use these state-owned enterprises to gain unfair advantages over private American businesses and their workers, we’ll have the ability to act against these practices, whether that injury occurs in their market, our market or a third market. That will help level the playing field for American businesses and workers.
“There’s work that remains to be done, and we’re committed to moving forward on all fronts -- bilaterally, multilaterally, and in negotiating new disciplines and in creating additional tools. And we’re committed to doing so in a way that addresses the concerns of all stakeholders. And in that regard, I’m grateful to have the opportunity to speak with you today, but even more importantly, to listen.
“And with that, I’ll invite our Congressional colleagues to present their views.
“We have a distinguished group of members of Congress announced to testify, and I think I see Congressman Levin from Michigan, who is the ranking member on the House Ways and Means Committee; he’s been a strong proponent of trade enforcement and we invite Mr. Levin to the table.”
