The world’s top economies will work to tackle excess production capacity in steel and some other industries, including government subsidies that have distorted markets, G20 finance officials said on Saturday.
In a draft statement obtained by Reuters, the G20 finance ministers and central bank governors meeting in China’s southwestern city of Chengdu said that excess capacity problems, “exacerbated by a weak global economic recovery and depressed market demand, have caused a negative impact on trade and workers.”
The document, which is still subject to change until a final version, adopted the same language agreed by G20 trade ministers on July 10.
Excess capacity in steel industry has been a hot-button issue for many G20 countries this year amid a slowdown in global demand that has led to a steel glut, layoffs and idled mills.
Officials from the United States and other countries have accused China, which produces over half the world’s steel, for keeping too many steel plants afloat with subsidies and other government support and allowing excess production to be dumped onto world markets.
The U.S. Commerce Department has imposed hefty anti-dumping and anti-subsidy duties against a number of Chinese steel products in recent months, in some cases more than 250 percent of the selling price. On Thursday, it levied duties of up to 25.6% on imports of cold-rolled flat steel used in cars and appliances from Britain, Russia, India, Brazil and South Korea.
G20 finance communiques in February and April made no mention of the problem. The statement does not single out China or any other country.
“We recognize that excess capacity in steel and other industries is a global issue which requires collective responses,” the group said in its draft. “We also recognize that subsidies and other types of support from governments or government-sponsored institutions can cause market distortions and contribute to global excess capacity and therefore require attention.”
The G20 will commit to enhance communication and cooperation on the issue and “take effective steps to address the challenges so as to enhance market function and encourage adjustment.”
The G20 steel-making economies will participate in a steel forum sponsored by the OECD in September and discuss the feasibility of forming a global forum on overcapacity.