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Finger-pointing and protectionism need to stop
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BLAMING other countries is always an easy, sure-fire way for politicians to whip up a storm over domestic economic woes, but finger-pointing and protectionism are counter-productive.
Last week, tens of thousands of German steel workers went on strike over steel products from China, while Indian steel giant Tata’s decision to close mills in Britain saw a media flurry, which placed the blame on China for flooding the market with products at artificially low prices.
It seems understandable to think of China, the world’s largest steel producer and consumer, as the source of global market woes. Upon closer inspection, however, it’s just a lame and lazy excuse for protectionism.
Although China produces nearly half of the world’s steel, most of its products are consumed domestically, and its exports to Britain and Germany account for a small fraction of the two countries’ imports, both in volume and sales.
Moreover, steel products from China are mostly low value-added, such as ordinary steel rods and plates, which many European countries no longer make and have to import anyway.
In fact, plenty of jobs have been created thanks to inexpensive Chinese steel: European companies buy these products and then use them to make goods that they export at a profit.
It should be noted that overcapacity is a global challenge amid a sluggish world economy. China is one of the most hard-hit, but the government is facing up to the headwinds.
China has reduced steel capacity by 90 million tons in the past three years and decided to cut another 100 to 150 million tons of crude steel capacity in the next five years with accompanying plans and funds to deal with possible redundancies.
The global steel crisis, as many Chinese steel plants have realized, can be traced to rising costs, low added value and poor management. The problem may seem more marked for European countries due to union forces that keep their labor costs much higher than many other countries.
The last thing the world needs is a trade war over this issue. Far more jobs will be lost than gained if protectionism prevails.
The Western countries’ doubt and objection of China’s market economy status might make it easier for them to accuse China of dumping products and justify the imposition of tariffs, but it won’t solve the problem.
The way forward for global steel makers is innovation and collaboration. High-end steel products are still in great demand despite the production glut, and cross-market cooperation can help allocate resources in an efficient and mutually beneficial manner.
It is time for the finger-pointing to stop, and instead, constructive reforms should be rolled out to improve competitiveness to ensure the sustainable growth of the steel sector.
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