US Requests WTO Consultations Over Alleged Chinese Aluminum Subsidies

The U.S. on Jan. 12 requested World Trade Organization consultations over alleged Chinese subsidies to certain producers of primary aluminum, the Office of the U.S. Trade Representative said (here). The Obama administration’s action -- its 16th case filed against China at the WTO -- alleged that subsidies have artificially expanded Chinese aluminum capacity, production and market share, and have significantly lowered the global price for primary aluminum, causing “serious prejudice” under WTO rules to U.S. interests, USTR said. China appears to subsidize through “artificially cheap” bank loans and artificially low-priced inputs for aluminum production, such as coal, electricity and alumina, USTR said.

Specifically, USTR is concerned that China is not acting in accordance with its obligations under the WTO provisions that say subsidies shouldn’t cause “serious prejudice” against the interests of WTO members. USTR claims that the alleged subsidies displace or impede U.S. aluminum-related exports to China and other markets through “significant price undercutting, price suppression, price depression or lost sales in a given market, or through an increase in Chinese world market share.”

Despite falling global aluminum prices, China built new large aluminum production facilities or expanded existing ones, USTR said. From 2007 to 2015, Chinese primary aluminum production rose by about 154 percent and capacity increased by about 243 percent, as global prices fell by about 46 percent, the agency said. Furthermore, U.S. primary aluminum production fell 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,” USTR said. China hasn’t been willing to take tangible steps to address its aluminum overcapacity, despite commitments made during several bilateral fora over the past two years and the Chinese State Council’s 2016 release of guiding opinions on structural adjustment needed for China’s metal industries, including aluminum, USTR said.

Lawmakers lined up to support the administration’s action. Congressional Aluminum Caucus co-chair Rep. Larry Bucshon, R-Ind., praised the action and pointed to unfair aluminum trading practices by China as a reason for the closure of an aluminum smelter that staffed 600 jobs in southern Indiana. “The aluminum industry has flourished for more than a century, but today American smelters are being shuttered,” Congressional Aluminum Caucus member Rep. Mike Kelly, R-Pa., said in a statement. “Even though aluminum demand has increased in the United States, domestic production has plummeted. With unfair subsidies and state-controlled banks, China has quadrupled its aluminum exports over the past decade, which has flooded the world market and depressed prices. We must hold China accountable.”

Century Aluminum CEO Michael Bless called USTR’s action an “important step” toward a long-term solution for the global aluminum industry. Senate Finance Committee ranking member Ron Wyden, D-Ore., said that China’s “below market loans” and “subsidized electricity” for its aluminum industry have contributed to the decimation of the U.S. aluminum industry. “Now it is up to the Trump Administration to follow through aggressively and deliver real results and real jobs for these hard-hit American communities,” he said. Industry officials testifying at the International Trade Commission in September called for the U.S. to take more trade enforcement actions against China’s aluminum trade practices (see 1609300042).