China steps towards steel export reductions

China has agreed to take steps towards reducing steel exports, but avoided binding limits at the G20 meet.

China agreed to steps toward reducing its politically volatile steel exports but avoided binding limits as leaders of major economies ended a summit Monday with a forceful endorsement of free trade and a crowded agenda that included the Koreas, Syria and refugees.

In a joint statement, President Barack Obama and Chinese President Xi Jinping and the leaders of Britain, Japan, Russia and other Group of 20 economies pledged to boost sluggish global growth by promoting innovation and to strengthen the global financial system.

In an effort to shore up public support for trade, they promised “inclusive growth” to spread the benefits of closer global integration more widely to millions of people who have been left behind by wrenching change. The pledge reflected a growing recognition that economic strains are fueling political tensions and a growing clamor to protect local industries.

Chinese leaders hope the two-day meeting will increase their influence in managing the global economy.

They have said they want the G20, created to respond to the 2008 financial crisis, to take on a longer-term role regulating the global economy. The joint statement reflects that ambition by calling the G20 the “premier forum” for economic cooperation. Beijing made trade a theme of the gathering in this lakeside city southwest of Shanghai but faces complaints that a flood of low-cost Chinese steel into global markets threatens US and European jobs, propelling the rise of political movements that promise to curb trade.

The joint statement calls for formation of a steel forum under the Organisation for Economic Cooperation and Development to study excess production capacity.

In a concession to Beijing, the statement doesn’t mention China by name and says excess steel capacity is a global issue, though US and European officials say the vast Chinese state-owned industry, which accounts for half of worldwide output, is the root of the problem. Washington has hiked import duties by 500 percent on Chinese steel to offset what it says are improper subsidies. Beijing promised in January to reduce steel production capacity by 100 to 150 million tons by 2020, a pledge Mr Xi repeated Saturday ahead of the G20 meeting. But that is half of China’s estimated excess capacity of 300 million tons, so deeper cuts would be required to bring it in line with demand.

“The market is distorted by subsidies and other support measures, and that is the fundamental problem,” said Japanese Prime Minister Shinzo Abe, according to broadcaster NHK.

The president of the European Union’s governing body, Jean-Claude Juncker, called Sunday for the G20 to take action on steel. He said the trade bloc will look at Beijing’s response when deciding whether to grant China market economy status, which would make it harder to bring anti-dumping cases.

The creation of the global steel forum could help to ease strains between Beijing and its trading partners, said economist Rajiv Biswas of IHS. “It may help to reassure countries about tangible steps China is taking,” he said.

Obama, Xi and other leaders called repeatedly during the meeting for governments to defend free trade.

“The benefits of trade and open markets must be communicated to the wider public more effectively,” said the joint statement. The World Trade Organisation is forecasting global trade growth this year at just 2.8 percent - its fifth year below 3 percent. The International Monetary Fund has cut its outlook for global economic growth to 3.1 percent.

Despite the joint statement’s positive language, the G20 is unlikely to be able to do much to boost trade or economic growth, Biswas said. He noted that talks on Obama’s TPP initiative for Asia-Pacific governments and a US-European pact have slowed or stalled, while Britain is wrestling with the effects of its June vote to leave the EU and other economies, including Russia and Nigeria, are in recession.

“On the global growth front, I would say it is hard for the G20 to come up with a coordinated action plan because many of the countries are caught up in domestic issues,” Mr Biswas said.

AP