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TWN
Info Service on WTO and Trade Issues (Nov24/02) WTO:
China rejects US criticism of its alleged overcapacity in critical
sectors Geneva, 30 Oct (D. Ravi Kanth) — The United States, along with the European Union and several other industrialized countries, seemingly criticized China on the issue of its alleged overcapacity in several sectors and products, which remains an area of critical concern for members at the World Trade Organization, said people familiar with the development. At a meeting of the WTO’s Committee on Subsidies and Countervailing Measures (SCM) on 29 October, several industrialized countries led by the US highlighted the apparent dangers that China’s alleged overcapacity in several critical sectors and products posed to WTO members at large, said people familiar with the development. However, China rejected the criticisms from the US and other industrialized countries on grounds that the issue of “overcapacity” does not fall under the ambit of the SCM Committee. For the past seven years, the US along with the EU, Japan, Canada, and Australia among others raised the issue of overcapacity in one forum or the other, and it also became a policy concern for the Group of Seven (G7) industrialized countries for some time now. At the SCM Committee meeting, the US highlighted the issue on grounds that it is “more relevant than ever, as overcapacity can be seen across a range of sectors and for products that are critical to global trade and the green transition.” The US maintained that the issue of overcapacity “concerns all WTO members, in particular developing countries, as entire industries may be decimated by unfair competition in markets around the world, directly impacting the livelihood of workers globally,” said people familiar with the discussions. Washington alleged that the magnitude of support “provided by China greatly exceeds what any other member provides, more than 10 times what the United States, Brazil, Germany and Japan provide,” said people familiar with the discussions. The United Kingdom said that the issue of overcapacity was not a problem of just developed countries vs China, while Australia said the SCM Committee has been a forum for discussion on subsidies and overcapacity going back almost a decade. Canada pointed to a sharp rise in steelmaking as per the estimates by the Paris-based Organization for Economic Cooperation and Development (OECD). Despite sluggish global demand, Canada said that concerns are increasing regarding similar impacts in other sectors such as electric vehicles and solar products that have also been the recipients of distortive subsidies from some members. The EU said that the current alleged overcapacity in China is not the outcome of full market competition but instead is the result of large-scale state interventions, said people familiar with the discussions. Brussels also noted that the “current WTO rules do not sufficiently take into account the distortive impacts of overcapacity; members should discuss how subsidies could be reduced and their negative impacts mitigated.” Japan, Chinese Taipei and New Zealand also made sharp interventions to underscore the need to discuss this important issue. CHINA’S RESPONSE China appears to have stood its ground by reiterating that the issue of overcapacity does not fall within the mandate of the SCM Committee. China said that “the term is not clearly defined either economically or legally and has now become a false narrative to excuse lack of competitiveness.” It emphasized that China’s supply is far from surplus from the perspective of industrial development trends, said people familiar with the discussions. China said that while it supports “measures to comply with the WTO rules,” the claims of overcapacity “is a double-standard behaviour based on latent protectionism, which is undermining climate change cooperation.” According to China, the Chinese government “continues to firmly promote high-level opening up and inclusive economic globalization”. Moreover, China insisted that it is a developing member and that its government is actually not rich enough to undertake such large-scale subsidies as other members claim. Canada and Australia rejected China’s claims that overcapacity was not an issue falling within the SCM Committee’s mandate. The US maintained that the Chinese President Xi Jinping had admitted last December that overcapacity was one of several challenges that must be tackled to further economic recovery. Rejecting these criticisms, China said that it was wrong to blame China’s companies for being successful and competitive. China said that some of the data being presented by those complaining about overcapacity, particularly data from the OECD, was misleading and not correct.
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