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Report: Chinese Steel Subsidies Out Of Control

Steel association report claims China's state-run steel industry creates an unfair advantage.

The U.S. steel industry is calling on Congress and other trading partners to take action against China if the Chinese government continues to control the majority of its steel production and provide massive subsidies to its steel industry.

The call for action was detailed in a report released July 30 by the American Iron and Steel Institute, a public policy organization representing the U.S. steel industry. The 106-page report, entitled "Money for Metal: A Detailed Examination of Chinese Government Subsidies to its Steel Industry," concludes the Chinese government granted more than US$52 billion in subsidies to steel producers over the past five years, making China's steel capacity four to five times larger than the entire North American steel industry.

Government-backed subsidies have allowed China's steel production to increase by more than 170% between 2000 and 2005 and another 20% in 2006, while exports of Chinese steel to the U.S. more than doubled in 2006.

The report also was critical of the Chinese government's controlling stake in its steel industry. The government owns 100% of eight of its 10 largest steel manufacturers and owns a majority of the 19 top steel producers.

While the U.S. and its trading partners can pressure China to comply with World Trade Organization laws, the decision ultimately rests with China, says Thomas Danjczek, president of the Steel Manufacturers Association.

"First, the Chinese have to change their own behavior. . . . Mr. Bush can't do that for them," Danjczek said during a phone briefing with reporters.

Industry experts say China needs to move toward privatizing its steel industry while the U.S. adopts legislation that provides relief to steel makers affected by a surge in Chinese imports.

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