Canada’s steel and aluminum producers are sounding the alarm. China is using Canada as an “entry point” into North America to sell metal at artificially low prices. This unfair practice threatens the survival of local industries, they claim in a rare joint statement.
“It’s happening right in front of us. We have to close the gap,” insists in an interview with Duty Jean Simard, president of the Aluminum Association of Canada. “We feel an imminent threat that is confirmed by the import data. Chinese imports have skyrocketed.”
He accuses Chinese metallurgists of taking advantage of state subsidies to allow them to produce below market costs. As a result, the volume of Chinese steel sold at an artificially low price has doubled in four years in Canada. The same goes for aluminum. A “flood” of Chinese metals is looming over the Canadian industry in the coming years, says Mr. Simard, who fears that this strategic sector will end up drowning.
Washington and Mexico have already imposed tariffs this summer to curb this “Chinese overcapacity” which allows the massive export of steel and aluminum. Ottawa has not followed and China is taking advantage of it, observes Jean Simard. Canada would therefore be on the way to becoming “the path of least resistance to reach the North American market.”
His association and the one representing steel producers are demanding customs duties of at least 25% on these metals “melted and cast” in China. These tariffs only represent a “harmonization” with the barriers already established by our two southern neighbors.
Play by the rules
China is not playing by the rules, accuse these two partners, who have come together for the first time in a joint statement. A real showdown is taking place between China and America on this issue of international trade.
On the one hand, American industries operate in a market economy. They are private companies that cannot produce beyond demand, otherwise losses accumulate and their financial viability is undermined. On the other hand, their Chinese counterparts can accumulate deficits because their government finances and supports them under political pretexts.
“When it is sustained by government intervention,” details a study by the Rhodium Group, a U.S. research group on the Chinese economy. “Structural overcapacity occurs when companies maintain or expand their unused capacity without regard to making a profit or loss, often due to a lack of economic pressure to operate efficiently, such as a hard budget constraint.”
China’s electric car industry is also suspected of using this practice to stifle competition and then dominate a vacant market.
China denies attack
Chinese President Xi Jinping says the complaints are groundless. “There is no such thing as Chinese overcapacity,” the government-affiliated Xinhua news site recently reported.
The topic still animates the upper echelons of the Middle Kingdom. A diplomatic note dated last April rejected these accusations of unfair practices by stating that “Chinese subsidies are much lower than those of the West.”
“The theory of ‘Chinese overcapacity’ basically reveals the decline in the competitiveness of Western industries,” Chinese spokesmen argue, referring to their excess production of batteries and electric vehicles. […] China has the world’s most complete industrial system, an excellent industrial ecosystem, and a huge market to dilute the cost of R&D and production. It’s not its fault to have these advantages.”