News Archives

Canadian Steel Industry Calls for Action to Address Chinese Subsidies

July 24, 2006 ( Ottawa, ON )

The Canadian Steel Producers Association (CSPA) today reiterated its longstanding concerns about the continued subsidized expansion of China's steel industry, and the resulting impact on North America's steel producers.

The CSPA was commenting on a major analysis released recently by several U.S. steel industry organizations, which shows that Chinese steel production expanded by 170 percent between 2000 and 2005, with exports also growing by 140 percent in the same period. The full report is accessible at www.steel.org.

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 (see Annex) 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.

"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 percent. 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. Canada's steel industry has consistently opposed such practices, and supports the position of NAFTA governments for significantly strengthened international disciplines on government market-distorting practices that adversely affect the steel sector.

"It is not enough for governments to recognize the problem", added Mr. 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."

Canada's steel industry is committed to competing in accordance with international trade rules. The CSPA will continue to work to this end with the government, and with NAFTA partners through the Security and Prosperity Partnership (SPP) initiative and the Steel Committee of the Organization for Economic Cooperation and Development (OECD).

<<
ANNEX
CHINESE GOVERNMENT SUPPORT FOR THE STEEL INDUSTRY(*)

1. Direct Government Subsidies to the Steel Industry
   • Cash grants
   • Energy and raw material grants
   • Land grants
   • Transfers of ownership interests on terms inconsistent with commercial considerations
   • Conversion of debt to equity in steel companies
   • Debt forgiveness and inaction regarding non-performing loans by State-owned banks
   • Preferential loans and directed credit
   • Tax incentives, including a variety of income tax exemptions and reductions
   • Targeted infrastructure development
   • Government intervention in raw material prices
   • Currency manipulation
2. Indirect Government Subsidies to the Steel Industry
   • Import barriers
   • Barriers to foreign investment in the steel industry
3. Structural Subsidies to the Steel Industry
   • Weak environmental regulation
   • Failure to enforce labor laws and ensure worker safety

(*) Source: Wiley Rein and Fielding LLP, The China Syndrome: How Subsidies and Government Intervention Created the World's Largest Steel Industry, July 2006

For further information: Barry Lacombe, Canadian Steel Producers
Association, (613) 238-6049