Who’s Watching the Money?
Posted by SCapozzola on January 9th, 2008
Yesterday, AAM released a new report detailing massive subsidies that China is providing for its steel industry. And word travels fast. Wire services, including Reuters and Bloomberg, have already picked up on the story, as have Forbes and various newspapers throughout the country.
It would be nice to say that good news travels fast. In this case, the news isn’t necessarily pleasant. As the Bloomberg article characterized it, China is “ignoring commitments made when it joined the World Trade Organization,” an “apparent violation of World Trade Organization rules,” according to the Pittsburgh Business Times.
The Allentown Morning Call noted that China’s massive subsidies allow its producers to “undercut overseas competitors,” what AAM characterizes as “market-distorting practices.”
As ManufactureThis noted yesterday, China’s whopping energy subsidies for steel production amounted to more than $15 billion in 2007 alone. This state-sponsored influx of cash helps explain how China moved from a net steel importer to the world’s largest exporter in a span of only two years. At the same time, however, the rest of the world’s steel producers have moved toward consolidating their production, a shift that might ordinarily helped to stabilize prices and bring uniformity to the market.
China’s “new mercantilism,” however, as the Washington Post’s Bob Samuelson termed it, holds little room for shared global objectives. Beijing has adopted a number of unilateral policies, like currency manipulation and the aforementioned steel subsidies, that suggest a “damn the competition attitude.”
China’s brazen policies have not made a resounding splash in the presidential campaign arena, unfortunately. As ManufactureThis has noted, the various presidential contenders have fallen all over themselves to denounce unsafe toys from China. But some of them stand mute on the subject of subsidies and pegged currency.
The voters are paying attention, though, and have shown in both polls and caucus voting that “The Economy” is a key issue. The next president ought to be paying close attention to what is going on in China, because it will have a profound impact on America’s productive industry.
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