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Domestic Steel Groups Release Study on the Effects of China’s Economic Policies

07/29/2009 - The American Iron and Steel Institute and the Steel Manufacturers Association release a study describing the negative impact of China’s economic policies on the U.S. and world economies.

The American Iron and Steel Institute (AISI) and the Steel Manufacturers Association (SMA) have released a study describing the negative impact of China’s economic policies on the U.S. and world economies.
 
The study — Rebalancing the U.S.-China Economic Relationship: A Steel Industry Perspective — examines in detail the policies China has pursued to give its exports an artificial advantage in international competition, including manipulating the value of its currency, subsidizing export-oriented industries, and failing to enforce environmental laws. The study also analyzes the effect these policies have had on the United States.
 
“The study shows that China is violating the basic rules of the international trading system,” said Thomas J. Gibson, President and CEO of AISI. “International trade is supposed to be based on comparative advantage and genuine factors of efficiency and competitiveness. What China is doing is more like old-fashioned 18th-century mercantilism. Through its policies of government ownership and subsidies, weak and inadequately enforced environmental rules and its manipulation of currency, border measures and raw material markets, the government of China has provided Chinese exports a tremendous artificial edge in world markets, at the expense of the United States and other countries.
 
“For the U.S. economy,” added Gibson, “the effects of allowing this 'China Inc.' system to continue include a $300-billion annual bilateral trade deficit, over 1.5 million lost manufacturing jobs since 2001, and a lowering of our annual GDP by as much as $500 billion."
 
“The U.S. and other open economies need to make it clear that success in global competition can no longer depend upon government interventions,” stated Thomas Danjczek, President of SMA. “It is time for the U.S. to rectify a steeply tilted international playing field, where private U.S. manufacturers cannot be expected to compete successfully against foreign companies that are reliant upon currency manipulation, and are propped up by major investment by their governments.
 
“While most other countries are exporting goods, the U.S. is exporting debt and jobs,” added Danjczek. “The effect has been the hollowing out of U.S. manufacturing industries. These trade-distorting practices must be eliminated.”
 
“China has used all sorts of measures to boost its exports,” explained Alan H. Price, Partner at Wiley Rein LLP and one of the authors of the study, “including currency manipulation, export restrictions, and straight-out subsidies. Because of this, China has accumulated foreign exchange reserves worth more than $2 trillion.
 
“Now the Chinese government has announced that it intends to use those reserves to help Chinese companies expand around the world,” added Price. “This makes it as clear as possible that China is not trading on the same terms as the United States and the rest of the world.”
 
The study on the effects of China’s economic policies is being released in connection with the current meeting of the U.S.-China Strategic and Economic Dialogue, which periodically reviews issues affecting the two countries.