July 27, 2006

China’s subsidized steel expansion irks domestic industry

Chinese steel production expanded by 170 per cent from 2000 to 2005

OTTAWA

The Canadian Steel Producers Association (CSPA) continues to raise concerns about the impact that the subsidized expansion of China’s steel industry is having on North America’s steel producers.

The CSPA’s comments followed a major analysis released by several U.S. steel industry organizations, which shows that Chinese steel production expanded by 170 per cent from 2000 to 2005, with exports also growing by 140 per cent in the same period.

With reference to several sources of information, including subsidy investigations by Canada, the study documents a wide range of significant means by which Chinese government agencies unfairly support their steel industry, enabling them to compete on a subsidized basis with North American producers.

These actions include several forms of direct and indirect financial support, export assistance, exchange rate manipulation, and interventions in raw materials markets, among others.

The study notes that many of these measures appear inconsistent with China’s WTO obligations.

“It is not enough for governments to recognize the problem.”

Ron Watkins, CSPA

“Canada’s steel producers are not at all surprised by the findings of this extensive analysis,” said CSPA president Ron Watkins. “CSPA members have consistently pointed out that they face these same forms of subsidized competition from China, placing Canada’s steel industry at an unfair disadvantage.”

Data compiled by the Canadian government show that Canadian steel imports from China have quadrupled since 2003, and in the first half of 2006 alone, the year-over-year increase exceeded 60 per cent.

As the U.S. study indicates, such rates of increase go well beyond the growth, which would have been realized without the range of support measures offered by China.

In 2005, NAFTA governments noted that a sizable share of new global steel capacity increases are attributable to government support and other types of aid, capacity that would not be added in normal market conditions and which will inevitably contribute to excess production and unfair international competition.

“It is not enough for governments to recognize the problem,” added Watkins. “It is important that the Canadian government join with its NAFTA partners to address these practices and to ensure market-based competition in NAFTA steel markets.”

DCN NEWS SERVICES

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