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How to make China pay for aluminum dumping without tariffs

  • Aluminum jobs in the U.S. have grown by 3.5 percent since 2013.
  • Even if we brought every U.S. aluminum smelter back online tomorrow, we could not produce enough primary aluminum in the U.S. to satisfy growing demand.
  • Market forces – not government interventions – should drive decision-making.
A worker loads an aluminum coil onto a loading dock at the Arconic manufacturing facility in Alcoa, Tennessee.
Luke Sharrett | Bloomberg | Getty Images
A worker loads an aluminum coil onto a loading dock at the Arconic manufacturing facility in Alcoa, Tennessee.

President Trump campaigned on a message of "Make America Great Again." Voters throughout the industrial Midwest and other manufacturing regions responded and voted for the president in states Republican presidential candidates had not won in years.

The administration has since expressed strong support for U.S. manufacturing, including the aluminum industry. But efforts to strengthen U.S. aluminum will only succeed if we all recognize the industry's global interdependence and maintain a laser-like focus on the real problem: structural overcapacity in China.

Recently released economic data show that overall aluminum jobs in the U.S. have grown by 3.5 percent since 2013. Jobs in aluminum sectors like metal rolling, foundries and extrusions ticked up even as primary smelting jobs dropped by more than two-thirds.

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At the same time, China continues to build aluminum capacity it does not need and cannot absorb. This distorts global markets and chills investment here at home.

Thanks to massive government subsidies, Chinese smelters can now make nearly 11 million more metric tons of primary aluminum than China actually consumes. This excess capacity alone is equal to around 40 percent of all primary aluminum produced in the rest of the world. And it doesn't stop there. Subsidized overcapacity further downstream has driven a 230 percent spike in Chinese imports of semi-fabricated aluminum into the U.S. since 2012.

"Across-the-board tariffs will do little to address overcapacity and could even undermine efforts to work with trading partners that share our concerns about China."

Chinese aluminum overcapacity is very real and must be addressed to ensure a sustainable U.S. industry. At the same time, we must recognize current market realities. Limiting trade with countries that, unlike China, operate as market economies will disrupt U.S. supply chains and ultimately hurt American workers.

Unfortunately, across-the-board tariffs will do little to address overcapacity and could even undermine efforts to work with trading partners that share our concerns about China.

We fully support the administration's goal of growing the U.S. aluminum smelter base to shore up domestic supply. But that will not happen overnight. In the meantime, we must avoid unintended consequences for the 97 percent of U.S. aluminum workers engaged in value-added manufacturing rather than primary smelting.

The facts are straightforward: we need reliable imports from good trading partners. Even if we brought every U.S. aluminum smelter back online tomorrow, we could not produce nearly enough primary aluminum here in the United States to satisfy growing demand.

The U.S. consumed more than twice the amount of primary aluminum last year than it has capacity to produce. And restarting smelters – to say nothing of building new ones – is a long-term, capital intensive process.

Our end goal is an industry where market forces – not government interventions – drive decision-making. Here are a few modest proposals to get us there.

First, exempt all countries that operate as market economies from Section 232 tariffs. The administration has taken promising first steps by temporarily exempting certain vital trading partners until April 30. However, these exemptions must be made permanent for added market certainty.

Second, refrain from quotas – in any form – for exempted countries. Supply quotas will only further distort the market, raise consumer costs and harm U.S. aluminum jobs that often rely on imported metal.

Third, establish an aluminum import monitoring system to ensure that no unfairly traded metal is entering the United States. This will provide greater transparency in the market and better protect the U.S. from unscrupulous entities that move metal through third countries to avoid duties.

Fourth, continue to maintain a tough stance on trade enforcement. Enforce global trade rules through targeted actions on products benefiting from illegal government subsidies. Aluminum Association members were successful in their first ever action against illegally dumped aluminum foil from China and other investigations are underway. The U.S. can't have free trade without rules and we can't have meaningful rules if they are not enforced.

And finally, initiate immediate government-to-government negotiations with China to address the trade distorting practices that drive structural aluminum overcapacity. We recently joined our association colleagues in Brazil, Canada, Europe, Japan and Mexico in calling for the G20 to establish a global forum on this issue. With the right parameters, timetables and enforcement mechanisms, we can tackle this challenge and make the global market both free and fair.

In the words of the president's new National Economic Council director Larry Kudlow: It's time for the U.S. to "lead a coalition of large trading partners … to let China know they are breaking the rules."

The people elected President Trump as a deal maker. Now is the time to strike a great deal.

Commentary by Heidi Brock, president and CEO of the Aluminum Association. Follow her on Twitter @HeidiBiggsBrock.

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