Economic Report Concludes Granting China Market Economy Status Would Have Devastating Impact on NAFTA-Wide Steel Industries

OTTAWA, Nov. 10, 2015 /CNW/ - A report released today concludes that treating China as a market economy in antidumping investigations would "severely damage the NAFTA steel industries and harm NAFTA economies."  The study, comprised of three economic analyses, was conducted by leading economists from Capital Trade Incorporated in Washington, DC;  the Centre for Spatial Economics in Ontario, Canada; and IMCO in Mexico City, Mexico.

Six steel industry groups —the American Iron and Steel Institute, the Steel Manufacturers Association, the Canadian Steel Producers Association, CANACERO, the Specialty Steel Industry of North America and the Committee on Pipe and Tube Imports — sponsored the report. They today issued the following statement:

"China is a state-run economy and does not operate on market principles, yet it argues that it must be treated as a market economy as of the 15th anniversary of its accession to the WTO in December 2016.  This third party report found that granting China market economy status is premature and would lead to significant job losses in our sector, and in steel communities where plants are being idled and jobs are already being decimated. This is unacceptable."

The groups also cited findings in the studies that show granting market economy status to China would:

• Cause NAFTA steel industry output to shrink by $31.5 billion and NAFTA economic welfare to decrease by $42.5- $68.5 billion.
• Cause job losses of 400,000 to 600,000 workers in the U.S. and near-term job losses in Canada of up to 60,000 highly-skilled, well-paying jobs.
• Make antidumping laws much less effective for remedying injury from dumping, since dumping margins would likely drop to zero or close to zero.

The report summary concludes, "China is a reforming economy, not a market economy, and now accounts for nearly half of global steel output. [China's] share is likely to continue growing if it is treated as a market economy for purposes of antidumping laws. Allowing China the benefit of this treatment, without requiring a completion of economic reforms, would remove a powerful incentive for completion of the reform program."

The report also notes that China's competitiveness in steel is artificial, "a creation of steel-oriented industrial policies that led to outsized increases in capacity, production and exports since 2002-2004."

The full report can be found here.

Background – Canadian Context for NAFTA-Wide Economic Impact Assessment of
Consequences Associated with Granting China Market Economy Status

The Canadian Steel Producers Association (CSPA) is pleased to release an independent report titled "Assessment of the Probable Economic Effects on NAFTA of Granting Market Economy Status to China" in partnership with the American Iron and Steel Institute, the Steel Manufacturers Association, CANACERO, the Specialty Steel Industry of North America and the Committee on Pipe and Tube Imports.  The combined report was undertaken by the three independent economists from Canada, the U.S., and Mexico.

The section of the report that deals with Canadian specific impacts was developed by The Centre for Spatial Economics (C₄SE) and is intended to provide annual, dynamic outcomes associated with granting China Market Economy status.

C₄SE's findings indicate that should NAFTA countries confer China with Market Economy status, the major economic and fiscal consequences for Canada would include:

• Near-term loss of up to 60,000 highly-skilled jobs across the country
• An annual loss of up to $8 billion in labour income from virtually all sectors of the economy
• A near-term reduction in Canadian GDP of up to $9.1 billion annually and a permanent reduction in gross domestic product (GDP) of up to $7.6 billion annually
• A near-term decline in non-residential investment spending of up to $3 billion a year and a permanent annual decline of up to $1.7 billion
• A near-term annual decline in federal government revenues of up to $1.2 billion and a permanent annual reduction of up to $0.9 billion
• A near-term annual decline in provincial government revenues of up to $1.1 billion and a permanent annual reduction of up to $0.7 billion

For the U.S., this joint study found that China having ME status would bring declines in domestic economic welfare as large as $46.5 billion. Employment effects would be very significant, extending well beyond the steel industry with labour demand reduced by as much as $29.6 billion and job losses in the range of  400,000 to 600,000 workers across the United States.

The work of the three economists concludes that the granting of Market Economy status to China would be premature and that doing so would needlessly damage NAFTA steel industries and overall NAFTA economies. The report additionally notes that results contained in the report are conservative in nature and may understate overall or "true" negative impact to the Canadian economy, which could be in excess of a 1% loss to total GDP.      

About the CSPA:
The Canadian Steel Producers Association (CSPA) is the national voice of Canada's $14 billion primary steel production industry. Canadian steel producers are integral to the automotive, energy, construction, and other industrial supply chains. CSPA seeks to work with governments and industry partners to advance public policies that enable a stronger, more globally competitive business environment for its member companies and supply chain stakeholders.

SOURCE Canadian Steel Producers Association

For further information: Media Contact: Joseph Galimberti, President, Canadian Steel Producers Association, 1-613-293-6806; AISI - Lisa Harrison, [email protected], 202.452.7115; SMA - Phil Bell, [email protected], 202.296.1515; CSPA - Joe Galimberti, [email protected], 613.238.6049; SSINA - Skip Hartquist, [email protected], 202.342.8450; CPTI - Tamara Browne, [email protected], 202.223.1700; Canacero - Salvador Quesada, [email protected], 52 (55) 5448-8162