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‘Over-investment in steel capacity responsible for glut, trade restrictions’

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Alan Wolff


Worried by the imposition of tariffs on steel and consequent trade wars between the United States and China, as well as other parts of the world, the World Trade Organisation (WTO) has stated that over-investment in steel capacity has led to trade restrictions repeatedly – in fact continuously – over the last half century.

According to the trade body, the cycle is more or less the same, noting that the grant of large government subsidies in this sector gives rise to uneconomic investment, a plethora of selective remedies in the form of anti-dumping duties are imposed by importing countries, followed by imposition of a comprehensive trade measure.

To address these concerns, the Deputy Director-General Alan Wolff said it is imperative that the major beneficiaries of the world trading system come together and identify their common ground.

He said: “If major players operate increasingly on two tracks – adhering to the rules of the system for some matters and operating outside the system for others, the current global trade arrangements, as was true of the fixed exchange rate system almost a half century ago, are unsustainable without change. Change must come in the conduct of members, but also through improvements in the existing agreements and how they are implemented.”

Wolff explained that the subject of overcapacity in steel production facilities has been the subject of countless international meetings over recent years.He stated that rather than the United States resorting to its domestic safeguard mechanism as it did in March 2002, under President George W. Bush, for consideration of a comprehensive response to steel trade problems, the U.S. invoked both the domestic authority and international justification of national security for its measure.

“At this point, history does appear to be repeating itself. The recourse this time, as it was during the Reagan Administration in 1983-85, has largely been for the U.S. administration to negotiate export restraints bilaterally with exporting countries who wish to avoid the imposition of tariffs on their trade.

“If the trade measures are confined to steel, the risks to the international trading system can be contained. If there is, as appears to be the case, trade retaliation followed by rounds of counter-retaliation, there would be at some point not only foreseeable systemic risk but actual damage.

“The 301 tariff threat following hard on the heels of the 232 steel and aluminum measures causes far more concern about the viability of a stable international trading system than either measure alone. And this is compounded by threats of further actions”, he added.

Worried that the position of world powers threatens global trade, Wolff noted that the positive work of the WTO continues as these threats remain unresolved, explaining that 22 countries have applied for WTO membership. Many are war-ravaged and highly vulnerable.

“It is imperative that the major beneficiaries of the world trading system – which certainly include China, the United States, the European Union, Japan, India and Brazil – come together and identify their common ground.

“There is only one world economy. Nations are interconnected. Autarky can only exist at the cost of accepting a much lower level of income for all countries’ peoples. The problems faced are real. Serious efforts must be invested in understanding them, identifying solutions, and implementing them. Each of the current major parties with whom I have spoken believes very strongly that it is in the right. Respective visions of the problems, much less the solutions, do not match.

“This needs to change. Real communication, blunt and direct, is required. Seeking to assess which country can best sustain a trade war only leads to one certain result – extensive casualties on all sides. Systemic failure is unacceptable. There being only this one planet to share, common ground must be found, and new balances struck”, he added.


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Alan WolffWTO
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