Obama to Press China to Reduce Steel Output, Lew Says

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By Len Bracken

Aug. 31 — President Barack Obama will urge his Group of 20 (G-20) counterparts to address excess steel capacity at their Sept. 4-5 summit in China, Treasury Secretary Jacob Lew said Aug. 31.

Excess industrial capacity, notably in steel, distorts markets and harms the environment as well as U.S. workers, Lew said in a speech at the Brookings Institution.

China acknowledges its contribution to this problem, he said in response to a question following his remarks. But Beijing has yet to make the “real tangible progress” that the U.S. will push for at the G-20 summit in Hangzhou, China, not far from Shanghai.

While at the G-20 summit, Lew said Obama will reassure his counterparts, which include several members of the Trans-Pacific Partnership (TPP), that the administration is making every effort with Congress to ratify the trade pact. Australia, Canada, Japan and Mexico are both G-20 members and TPP signatories.

“Obviously, I can't take away the concern people have when they look at the difficult political environment, but I think they do understand that the effort will be the one that's needed to get it done,” Lew said.

Currency, BIT Talks

The treasury secretary also said the G-20 will build on past work against the use of currency devaluations to gain an unfair trading advantage. The U.S., he said in response to a question, understands that market forces can drive down the value of the Chinese renminbi, but Washington would like to see the Chinese currency rise when market forces correspond to a higher value for the currency.

The conclusion of a U.S.-China investment treaty by the end of the year will require both sides to pick up the pace in the talks, Lew said. Much progress has been made in the U.S.-China Bilateral Investment Treaty (BIT) talks, he said, citing a recently concluded round of talks in Beijing. Lew said he hopes the two sides can reach an agreement by the end of the year.

Obama's trip to China will begin with bilateral discussions with China’s President Xi Jinping, where the BIT talks will be on the agenda (161 ITD, 8/19/16).

Transition From Steel

Obama will call on G-20 governments to increase their spending—although he did not specify how—to smooth the transition for workers that move on to other industries when steel plants are retired, Lew said. The Chinese, he said, have proposed measures at their National People's Congress in March that “deal with excess capacity as part of their structural reforms.”

“What they need to do is to tackle the very real challenge of pressing these changes down into the provinces where steel capacity is owned by state-owned enterprises and other powerful interests where they're employing a lot of people and it's not just the local economy but very much the political and social system as well,” he said. “I think they understand that if they don't address it, it's corrosive to China's economy.”

The U.S., he said, went through a restructuring of its steel industry and have a more efficient industry as a result, he said.

China will have to close more of its older steel factories to meet its environmental objectives, he added, but they should not be replaced by new factories.

‘Shared Bipartisan Priorities.'

As for the problem of ratifying the TPP, Lew said trade-related issues only tend to come up for public debate when trade agreements are pending before Congress, which can obscure the fact that these agreements are “shared bipartisan priorities.”

The president remains committed to winning congressional approval of TPP, Lew said. The Senate majority leader and the House speaker, he said, are “committed to getting the agreement approved.”

Senate Majority Leader Mitch McConnell (R-Ky.) recently said the current agreement won't be taken up in 2016, but trade analysts have interpreted his remarks as leaving room for a lame-duck vote if outstanding issues are resolved (167 ITD, 8/29/16).

To contact the reporter on this story: Len Bracken in Washington at lbracken@bna.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bna.com

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