"Thank you for your email. You are correct that China’s abuse of global trade laws has a serious impact on the steel industry. They do employ a wide range of illegal trade practices to support their export driven manufacturing sector. This comes directly at the expense of the U.S. steel industry and the U.S. manufacturing sector as a whole. China was allowed entry into the World Trade Organization in 2001, after agreeing to abide by the rules of global trade. Since that time, they have completely disregarded their commitments under the WTO and, as a result, the U.S. has lost over 6 million manufacturing jobs and our trade deficit with China has gone from $83 billion in 2001 to $295 billion, the largest trade imbalance we’ve ever recorded with a single country.
For our industry, the impact of China’s trade practices has been a surge in Chinese steel imports, dumped in our market below the cost of production. Last year, China’s economy grew at its slowest pace in 13 years. Despite this, China’s steel production increased by 3.1%. China accounted for 46.3% of world crude steel production last year, far more than the demand of its domestic market. Steel imports into the United States increased by 16.9% last year. Imports from China increased by 33.5%. This import surge was not driven by strong U.S. demand. Our economic growth continues to be slow and U.S. steel mills are only running at 70% of capacity. The imports are increasing because subsidized steel from other countries, notably China, is being dumped in our market. The impacts are real. RG Steel is selling its assets in bankruptcy and other U.S. mills are on the market.
Besides illegal subsidies and export quotas, you should also examine Chinese currency manipulation and China’s state-owned enterprises. China pegs its currency to the U.S. dollar as opposed to letting the free market determine its value. By pegging its currency to the dollar, China keeps its currency undervalued by up to as much as 40%. This undervaluation makes Chinese products cheaper in the U.S. and our products more expensive in China’s market. This is China’s most potent trade weapon and has been the primary driver of our enormous trade deficit with China.
China also has several state-owned enterprises in the steel industry. State-owned enterprises are not private companies, but government entities that follow government directives. As a result, American companies are not competing against other private companies, but against foreign governments, which creates major market distortions. SOEs have advantages that most shareholder-owned companies do not. They get access to massive and often illegal subsidies like cheap capital from state-owned banks. They get free land. Their governments subsidize energy costs and exports. All these protectionist trade practices come together to feed their growth.
To combat these illegal trade practices, the U.S. and other countries must do more to enforce the rules of free trade. China has to face consequences for breaking the rules. Nucor has brought several trade cases against China over a variety of steel products and we will bring more. Their abuse of our open markets must stop. We will not reinvigorate our manufacturing sector and create the high-paying jobs that support the middle class unless we take strong trade enforcement action. Also, Congress must pass legislation that labels China a currency manipulator and imposes penalties. There are solutions to these trade issues, but it requires political will to implement these solutions.
I hope this helps you from a macro-level. As I’ve often said publicly, you can rest assured that we will continue to remain diligent and bring legal challenges against those countries responsible for the flood of imports that is not market driven. It's a very serious issue affects all of our products. It has traditionally been more so in the long products, rebar and sheet, but also now affects plate. Until our government steps up and shows leadership on the solutions I mentioned above, we’ll continue to fight, and we’ll continue to win."
photo source: chinadaily.com.cm