Info Service on WTO and Trade Issues (Nov16/01)
1 November 2016
Third World Network
Industrial overcapacity due to subsidies, claim US, EU, Japan
Published in SUNS #8342 dated 27 October 2016
Geneva, 26 Oct (D. Ravi Kanth) -- The United States, the European
Union, Japan, and Mexico have sought to raise an issue on the role
of subsidies and their contribution to industrial overcapacity at
the World Trade Organization on Tuesday (25 October).
The move was an attempt to legitimize decisions made at the G20 meetings
in which the sherpas from Washington, Brussels, and Tokyo had played
a central role in finalizing the outcomes, trade envoys told SUNS.
The joint proposal by the four countries under a misleading title
- "the contribution of the WTO to the G20 call for action to
address certain measures contributing to overcapacity" - came
up for discussion at a meeting of the WTO's Committee on Subsidies
and Countervailing Measures.
The two-page proposal introduced by the four proponents was discussed
at the G20 leaders' meeting in Hangzhou, China, last month (4-5 September),
after it was finalized at the meetings of the G20 trade ministers
in Shanghai (9-10 July), and G20 finance ministers in Chengdu, China
The G20 leaders have referred to the issue of industrial overcapacity
in steel and other sectors in paragraph 31 of the Hangzhou Summit
The G20 leaders said: "We recognize that the structural problems,
including excess capacity in some industries, exacerbated by a weak
global economic recovery and depressed market demand, have caused
a negative impact on trade and workers. We recognize that excess capacity
in steel and other industries is a global issue which requires collective
responses. 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
As a follow-up to the G20 leaders' call, the four proponents pressed
the WTO's SCM Committee to "look more closely at the extent to
which subsidies contribute to overcapacity and how they could be further
disciplined in the interest of providing a level playing field for
traders and an environment where trade and resource allocation is
The US, the EU, Japan, and Mexico while acknowledging that the issue
of "overcapacity requires multifaceted and long-term solutions
some of which go beyond the remit of the WTO," pressed for a
number of trade-related measures to be considered by WTO members that
could address subsidies which contribute/aggravate overcapacity -
"not only in the steel industry, but also in other sectors such
as the aluminum industry."
They insisted that "the SCM committee could launch the issue
among members" to address three questions such as "to what
extent have subsidies contributed to the creation of excess capacity,"
"what are the specific government or business practices that
have contributed to the creation of excess capacity," and "in
what areas are current disciplines in the SCM [Agreement on Subsidies
and Countervailing Measures] incomplete or inadequate to address these
Significantly, China which hosted the G20 meetings this year was not
a party to the proposal. Clearly, the language on the subsidies and
overcapacity was formulated by the so-called G20 negotiating sherpas
from the US, the EU, and Japan while the sherpas from the G20 developing
country members merely adopted reactive positions, said a trade envoy
from a developing country.
The current US trade representative Ambassador Michael Froman when
he was a G20 Sherpa during 2009-2012 played a central role in formulating
the language on trade issues in the G20 communiques, the envoy said.
Invariably, the US along with the EU and other industrialized countries
as well as some developing countries not only proposed language that
severely undermined the Doha Development Agenda negotiations, but
made it difficult for other G20 developing country members to continue
the negotiations, the envoy added.
Speaking at the Graduate Institute on 17 October, the USTR said that
President Barack Obama when he attended the first G20 leaders' meeting
in April 2009 was asked about his perspective on the Doha Round.
Ambassador Froman, who accompanied President Obama to the G20 leaders'
meeting in London as deputy national security advisor in charge of
economic issues, said his president agreed to take a hard look at
the Doha Round so as to give his view at the next meeting in Seoul
"More than a year later, at the G-20 meeting in Seoul (South
Korea), there was another critical discussion of the Doha Round,"
Ambassador Froman said.
President Obama who was asked to start the discussion on the Doha
Round at the Seoul meeting, according to the USTR, "made clear
his view that we needed to do something different [which implied abandoning
the Doha negotiations]."
Despite calls from other G20 leaders for continuing with the Doha
negotiations, President Obama said "if we are serious about strengthening
the multilateral trading system, we need to move beyond our traditional
invocations of the Doha mantra and start thinking seriously about
how to revitalize the WTO," according to Ambassador Froman.
In short, the G20 decisions on trade were primarily formulated by
the US along with its traditional allies such as the EU, Japan, Canada,
and Australia, the envoy said.
"We are now seeing the first major move to legitimize one decision
among many from the G20 leaders' communique because it suits their
interest but not the developmental issues of the Doha agenda,"
said another envoy from South America.
"If they are so serious about industrial overcapacity, why not
address the issue in the Doha rules negotiations," the envoy
If there is a strong case for discussing new trade remedy measures
for industrial capacity, including the "specific and government
business practices," why not discuss the issue of eliminating
zeroing methodology which is being aggressively used by the US to
impose anti-dumping measures, the envoy argued.
Besides, the US, the EU, and Japan had also built a range of industries
based on subsidies and questionable business practices over the past
seven decades, the envoy suggested.
"Will the US and the EU agree to including business practices
adopted by Apple or high-tech industries," the envoy asked.
At the SCM meeting , the EU argued that the industrial excess capacity
in steel and other sectors was made possible because of "easy
The US said overcapacity was generating a negative effect. Canada,
Australia, Russia, and Korea supported the joint initiative introduced
by the US, the EU, Japan, and Mexico.
Venezuela sought to know why the issue cannot be addressed in the
Doha negotiating group on rules while Brazil called for a comprehensive
discussion on all subsidies.
China argued overcapacity is a problem of business cycle in which
periodic and structural problems played their part.
China maintained that the G20 forum is working on the issue so as
to develop a mechanism to address the issue of overcapacity. It suggested
that the WTO is not the right forum.
In conclusion, the joint proposal is an attempt to force/legitimize
the G20 issues of interest to the US, the EU, Japan, Canada, and Australia
among others at the WTO while abandoning the Doha rules negotiations,
trade envoys maintained. +