CLOSING CASE: Is China Dumping Excess Steel Production?
1. Does the evidence suggest to you that China is dumping excess steel
production on world markets?
- Yes, there are many evidences in the case suggesting that China is dumping excess
steel production on world markets:
+ “By the end of 2015, Chinese steelmakers were estimated to be producing 300 million
more tons of steel a year than required for domestic consumption.”
+ “...the Chinese are seeking to export this unwanted product, even if it is at a loss”
+ “China exported more than 100 million tons of steel in 2015, making its steel exports
alone larger than the production of any other country in the world except for Japan.”
+ “The prices for Chinese steel products appear to be at least 10 percent lower outside
of China than within the country.”
2. Absent of any response from other nations, how long can China pursue this
policy?
- If other nations don’t have any response, China might be able to maintain this policy
for a while, but it won’t last in the long term as it will have to face massive mounting
financial losses. In its first year of dumping alone (2015), the largest 101 Chinese steel
firms lost $12 billion, roughly twice the profits they earned in 2014.
3. Who is harmed by this action? Who might benefit?
- The steel dumping by China harmed the steelmakers around the globe. For example:
+ “The United Kingdom lost some 4,000 steelmaking jobs in the second half of 2015.”
+ “The steel giant ArcelorMittal blamed dumping by Chinese firms for a $8 billion loss in
2015.”
- The ones benefiting from China’s dumping are steel buyers worldwide that gain access
to cheaper steel for construction or manufacturing. The Chinese government also
benefited from this move as it allowed them to dominate the international steel market,
with the share of Chinese rebar imported into the UK market increasing to 45%, from
0% in 2010, giving the Chinese government a great influence on the UK market, thus on
UK politics.
4. What alternative policy might China pursue? What are the costs and benefits of
this alternative policy to China?
- Instead of encouraging the export of surplus steel to the global market, China could
pursue reducing domestic steel production so it doesn't overproduce anymore. This
could be achieved by increasing steel export taxes, cutting down on steel production,
investing in other industries and supporting the transition of affected workers into new
employment.
- Benefits:
+ Reduces oversupply and restores market balance.
+ Ensure resources in China are allocated more efficiently.
+ Help ease international trade tensions, avoid receiving high tariffs from other countries
in response.
- Costs:
+ Potential widespread job losses.
+ Resistance from vested interests and local governments that depend on the steel
industry for revenue.
5. Are the EU and the United States correct to impose significant antidumping
duties on imports of Chinese steel? What will the benefits of such policy be? Are
there any drawbacks?
- Yes, the imposition of significant antidumping duties on imports of Chinese steel from
the EU and the United States is a justified and correct response.
- Benefits:
+ Protect their domestic steel industry, their domestic market and their workers.
+ Send a signal to exporting countries that dumping will not be tolerated and may deter
similar practices in the future.
- Disadvantages:
+ High duties could increase input costs for steel-intensive industries such as the
automotive, engineering and construction industries, which could in turn increase
consumer prices in their own countries.
+ Imposing high antidumping duties on Chinese steel could lead to retaliation by the
Chinese government against other industries in the U.S. and the EU, leading to broader
economic tensions.
6. Can you think of any unintended consequences that might occur as the result
of the imposition of antidumping duties on Chinese steel imports by the United
States and the EU?
- There are several unintended consequences that arise from the imposition of anti-
dumping duties on Chinese steel imports by the US and the EU:
+ The increased cost of steel will hurt domestic industries that rely heavily on it, such as
construction, automotive, and machinery manufacturing. This, in turn, can reduce their
global competitiveness due to higher input costs.
+ China may retaliate by imposing tariffs on U.S. or EU goods, escalating trade
tensions.
+ Excessive protection could lead to complacency among domestic steel producers,
weakening their incentive to innovate or improve productivity, and ultimately diminishing
their long-term competitiveness.
7. What other steps could be taken in the long run to reduce the probability that
producers in China and elsewhere will dump their excess production at a loss on
world markets?
- Some measures that in the long run will reduce the probability that producers in China
and elsewhere will dump their excess production at a loss on world markets:
+ Establish stronger multilateral trade rules.
+ Tightly regulating steel production capacity of each country.
