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By Len Bracken
The U.S. has initiated a legal challenge against China's loan and electricity subsidies for aluminum at the World Trade Organization, U.S. Trade Representative Michael Froman said Jan. 12.
China dramatically increased its aluminum production capacity in recent years with noncommercial loans worth billions of dollars and with low-priced electricity in violation with WTO rules, Froman and other U.S. officials told reporters at the Office of the U.S. Trade Representative. They added that China did this at a time when global prices for primary aluminum were plunging and production in the rest of the world remained flat, undercutting the prices of U.S. producers to an extent that decimated the American industry.
“We expect China to take the problem of excess capacity seriously and take concrete steps to address our concerns,” Froman said.
The U.S. requested consultations with China in Geneva under a provision in WTO Agreement on Subsidies and Countervailing Measures that concerns illegal subsidies that suppress prices, a senior U.S. trade official said at the briefing. The U.S. can request the establishment of a WTO dispute settlement panel if, after 60 days, the two sides can't settle the dispute.
The Chinese Embassy in Washington, D.C., did not respond to a request for comment on the case.
The Obama administration believes WTO dispute settlement is the best way to address the problem of falling global prices because a resolution in the case would affect all markets, the official said. He indicated that other countries may join the case.
Froman said the case was filed by the USTR on behalf of Century Aluminum Co., the largest producer of primary aluminum in the U.S., which was assisted in developing the WTO subsidies case by its outside counsel, Wiley Rein, LLP and the United Steelworkers Union.
“This case represents a systemic challenge to the way China has built massive capacity through highly subsidized state-directed financing that would not be possible in a market based economy,” Alan Price, a partner at Wiley Rein, told Bloomberg BNA after the event. “The resulting excess capacity has caused prices to collapse in product line after product line, driving Western producers that must earn a return on their capital out of business.”
Jesse Gary, executive vice president and general counsel of Century Aluminum, said at the briefing that his company operates three of the five remaining primary aluminum smelters in the U.S., including one of the only smelters in the world that produces high-purity aluminum that has defense and aerospace applications. He said the American aluminum industry is facing a “fundamental crisis.”
Two-thirds of U.S. aluminum smelters have closed because of Chinese price-suppressing actions, Froman said.
Rep. Larry Bucshon (R-Ind.) and Rep. Dave Loebsack (D-Iowa), co-chairs of the caucus, said the operations of Aloca Inc. in their states have been adversely affected by excess Chinese capacity. Bucshon noted the loss of 600 jobs due to the closure of smelting plant in 2016 his state and the drop-off in smelters operating in the U.S. from 2001 to 2016, adding that only one is operating at full capacity.
“I want to encourage the new administration to continue to do the same kind of work, even intensify that work, if possible, going forward,” Loebsack said, noting that the annual economic output from aluminum manufacturing and wholesaling operations in Iowa reaches roughly $2 billion.
Ohio Sens. Sherrod Brown (D) and Robert Portman (R) said in a joint statement that the following aluminum extruders in their state would benefit from a successful WTO case: Magnode Corp.; Pennex Aluminum Co. LLC; Kaiser Aluminum; Astro Shapes, Inc.; Aerolite Extrusion Co.; and General Extrusions Inc.
House Ways and Means Committee Chairman Kevin Brady (R-Texas) said in a statement that he looks forward to working with the incoming Trump administration on enforcement cases. He said his committee initiated a study last spring by the International Trade Commission on unfair trade practices affecting the U.S. aluminum industry, which could be released at the end of July.
Heidi Brock, president of the Aluminum Association, said in a statement that her group is still reviewing the WTO complaint and currently neither supports nor opposes the filing of the case. She said a negotiated agreement between the U.S. and Chinese governments is needed to address aluminum overcapacity in China, but did not indicate whether such a pact could be related to the case. The association has sent its trade action plan, which calls for addressing Chinese subsidies and other actions, to the incoming Trump administration.
Launching a new WTO move late in the second term of the Obama administration serves as a capstone of its trade enforcement initiatives, which were catalogued in a lengthy Jan. 12 White House fact sheet.
To contact the reporter on this story: Len Bracken in Washington at email@example.com
To contact the editor responsible for this story: Jerome Ashton at firstname.lastname@example.org
The USTR press release on the action is available at https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/january/Obama-Administration-Files-WTO-Complaint-China-Aluminum.
The aluminum association action plan is available at http://www.aluminum.org/sites/default/files/Advancing%20American%20Aluminum.pdf.
The White House fact sheet on the Obama administration's trade enforcement record is available at https://www.whitehouse.gov/the-press-office/2017/01/12/fact-sheet-obama-administrations-record-trade-enforcement.
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