United States files WTO complaint on China’s subsidies to aluminum producers

U.S. Trade Representative (USTR) Michael Froman has announced that the United States has launched a new trade enforcement complaint against the People’s Republic of China at the World Trade Organization (WTO) concerning China’s subsidies to certain producers of primary aluminum.

In a news release, the USTR states the action follows a number of efforts to persuade China to take steps to address the excess capacity situation in its aluminum sector. The complaint begins a process to address U.S. concerns that China’s subsidies appear to have caused serious prejudice under WTO rules to U.S. interests by artificially expanding Chinese capacity, production and market share and causing a significant lowering in the global price for primary aluminum.

“This latest challenge once again demonstrates the Obama administration’s unwavering commitment to ensuring a fair and level playing field for American workers and businesses,” says Froman. “Artificially cheap loans from banks and low-priced inputs for Chinese aluminum are contributing to excess capacity and undercutting American workers and businesses. Today’s action follows significant engagement by this Administration on excess capacity and demonstrates our commitment to hold China to its trade obligations. Our record of tough enforcement with China speaks for itself.”

“China’s subsidies have done enormous damage to the U.S. and global aluminum industries,” says Michael Bless, president and CEO of Century Aluminum. “Following a series of closures due to Chinese overcapacity, Century operates three of only five remaining smelters in the United States. USTR’s decision to challenge these unreasonable, illegal and harmful subsidies is an important step towards a long-term solution for the global aluminum industry, and we are thankful for the Administration’s efforts on the industry’s behalf. We look forward to continuing this work in the coming months and years.”

According to the USTR, chronic overcapacity in China resulting from China’s failure to transition to a market economy has been identified as a problem in a number of sectors. In this case, the USTR notes, “We are seeking to address one core aspect of this problem by challenging the use of subsidies that have generated overcapacity. This is one facet of state-sponsored industrial policy that has led to the overcapacity that has in turn resulted in price and other harmful effects manifested in the United States and other countries on businesses and working people in this important economic sector.”

In particular, excess capacity and production in China’s aluminum sector are contributing to lower global primary aluminum prices, to the detriment of U.S. primary aluminum producers, the USTR says. Despite sinking aluminum prices, China has been constantly building large new or expanded aluminum production facilities. From 2007-2015, Chinese primary aluminum production increased by about 154 percent and capacity increased by about 243 percent, while global prices for fell by about 46 percent. Also during the same period, U.S. primary aluminum production decreased by about 37 percent and capacity decreased by about 46 percent, even though overall U.S. consumption increased. The number of U.S. aluminum smelters fell from 14 in 2011 to five in 2016, with only one operating at full capacity.

Supporting the move have been domestic aluminum producers and union employees.

In a statement, the Washington-based Aluminum Association applauded the move by the Obama administration. Heidi Brock, president and CEO of the Aluminum Association, says, “The Aluminum Association will review in detail the consultation request filed by the United States at the WTO. We will assess the impacts of this action across the full value chain and continue to believe that a negotiated agreement between the U.S. and Chinese governments is needed to address the fundamental issue of aluminum overcapacity in China.

“Overcapacity is damaging to all segments of the domestic aluminum industry – upstream, midstream and downstream – and it is critical to assess the potential impact of any trade action on all aluminum producers. The Aluminum Association looks forward to working with the incoming administration to help us create a level playing field for the entire industry,” Brock adds.

Also supporting the move has been the United Steelworkers (USW), which released a statement supporting the USTR’s move in requesting consultations with China regarding its continuing expansion of production in the aluminum sector.

“This ongoing expansion and overcapacity has resulted in injury to U.S. production and employment. The filing is the result of a cooperative effort initiated more than one year ago by the USW and Century Aluminum with the USTR to address global overcapacity in the aluminum sector,” says USW International President Leo Gerard.

"USTR's request for consultations is intended to eliminate the devastating effects China's actions to dominate world aluminum production have created for its competitors. This is called 'serious prejudice' in trade law terminology.”