WTO case sheds light on China’s illegal practices

The Obama administration announced Thursday it filed a historic World Trade Organization (WTO) case against China’s illegal subsidies for its domestic aluminum industry. This, however, is only the first step in this process.

With President-elect Trump’s inauguration in a few days, thousands of American aluminum workers will soon look to the Trump administration to stand up to China by litigating this landmark trade case. 

{mosads}For years, the Chinese government has used its state-directed financial system and other channels to expand and maintain millions of tons of unnecessary primary aluminum smelting capacity.

In the last year alone, more than 3,000 American aluminum workers lost their jobs because China illegally subsidized its domestic aluminum industry. It has done this by granting low-interest loans, debt forgiveness and energy subsidies to its aluminum producers. 

SCOOP: Obama to launch WTO complaint Thursday against China for sweeping aluminum subsidies https://t.co/MdJc2VJf5H

— Scott Patterson (@pattersonscott) January 11, 2017

Due to China’s illegal trade practices, our company, Century Aluminum, was forced to dismantle a smelter in West Virginia, which supported 650 direct jobs, and partially shutter another in Kentucky at the cost of 400 additional jobs.

All across the United States, thousands of workers have lost their jobs due to China pumping state support into an already bloated industry. The impact on these families and their communities has been devastating. 

In 2001, when China joined the WTO, there were 18 aluminum smelters in the United States. Today, there are only five, following a series of closures under the pressure of depressed global aluminum prices.

Over the same period, China has gone from a minor player in the global industry to producing more than 50 percent of total global supply.  

It is notable that China’s industry consists largely of high-cost smelters at the top end of the global cost curve. These plants would not exist without the illegal state support.

Consider Aluminum Corp. of China, Ltd. (Chalco), one of the largest aluminum producers in China and a Chinese state-owned entity.

Chalco’s production alone is far greater than the entire U.S. aluminum industry. Documents available to the public show that, since 2008, Chalco’s net losses total nearly $4 billion.

Its debt has climbed to over $20 billion and its debt-to-equity ratio is 2.8, exceptionally high by industry standards.

Market-based financial institutions would not fund such a risky venture, but Chinese state-run banks do. The WTO explicitly prohibits these types of illegal subsidies that China appears to be employing.

U.S. aluminum manufacturers simply cannot compete in a market that no longer functions under sound principles due to government interference.

We are thankful for the Obama administration’s efforts on behalf of our industry and look forward to working with the Trump administration.

Together, we can defend our industry from unfair trade practices and protect thousands of American aluminum jobs. 

Earlier this month, President-elect Trump tapped Robert Lighthizer to be United States Trade Representative (USTR). As deputy USTR under President Reagan, Mr. Lighthizer negotiated over two dozen bilateral trade agreements; he has a strong record of standing up for American industry.

Once Mr. Lighthizer is confirmed by the United States Senate, we look forward to working with him to move this WTO case forward, as there is little reason to believe that China will scale back its brazen subsidy program for state-directed industries. 

China is only stepping up its manipulative tactics. On Dec. 11, the fifteenth anniversary of China’s membership at the WTO, China launched dispute resolution procedures against the U.S. and EU.

The Chinese claimed automatic market economy status and argued the U.S. and EU must treat them as such when calculating antidumping duties on Chinese goods.

Obama takes parting shot at China with WTO aluminium case https://t.co/7MXJfiQfvc via @FT

— R Meléndez-Ortiz (@RMelendezOrtiz) January 12, 2017

China is not a market economy; the state continues to direct enormous amounts of capital to favored industries to increase production and employment.  

These actions are completely devoid of basic economic principles. This behavior is remarkably apparent in the global aluminum industry. 

We hope aluminum producers in Canada and Europe will ask their governments to join the United States and oppose China’s unfair trade practices that negatively impact the global aluminum industry.

This is a global problem that requires a global solution. Only by addressing China’s unfair trade can we hope to retain and increase employment for the thousands of men and women who manufacture safe, reliable American aluminum.

I am fortunate to spend a great deal of time at our facilities, meeting with our hardworking staff who make our company, the aluminum industry and our country great.

They work to support their families and build our communities. China should not be allowed to decimate an iconic American industry and put the livelihoods of thousands of hard-working Americans at risk. 

We are confident the Trump administration will take strong and decisive action against China’s illegal aluminum subsidies — a move backed by thousands of American workers and those wary of an unfettered China.

We look forward to working with the incoming Trump administration to move this WTO case forward with the vigor American workers, their families and manufacturers deserve. 

Mike Bless is president and CEO of Century Aluminum, the largest producer of primary aluminum in the United States. 

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