It emerged this week that the Chinese government has been taking action to make sure that the Chinese Communist Party is the ultimate decisionmaker at dozens of state-owned Chinese businesses. The Financial Times reported that more than 30 Chinese state-owned companies have had their by-laws amended to state that the Communist Party provides “direction” on key decisions.
[Dan DiMicco | August 18, 2017 | The Hill]
So much for western hopes that China would progress rapidly to become a market economy after joining the World Trade Organization in 2001
The Trump administration needs to keep this dynamic in mind as it considers whether to apply Section 232 protection for the U.S. steel and aluminum industries. Section 232 of the 1962 Trade Expansion Act empowers the federal government to take action, including tariffs and/or quotas, to protect an industry if that industry is vital to U.S. national security and is threatened by unfair trading practices.
Today, these vital industries are at risk due to overproduction in China. In the case of steel, China’s excess capacity today exceeds the total of U.S. production. Chinese overcapacity weighs on the world market, driving down steel prices and threatening the profitability and sustainability of the U.S. industry. That threatens our national security capability, because steel, in many different forms, is vital to our military — on land, in the sea and in the air.
There’s no question that the root cause of the world’s steel overcapacity is a Chinese industry that is massively subsidized by the Chinese government. Those subsidies, running into the hundreds of billions of dollars, have enabled China to build up a huge (and highly polluting) steel industry, and keep it going despite billions in losses.
China has promised again and again to reduce production and mothball steel mills and furnaces. Yet each year, steel production continues to rise. The World Trade Organization is unable to pressure China in any meaningful way.
It’s not just steel and aluminum that have suffered as a result of foreign mercantilist practices. Foreign support of targeted industries has led to the decline of many of our manufacturing and agricultural industries. On the civilian side, this has led to large-scale unemployment and the decay and desolation of many once-prosperous towns and cities.