Letter to Ambassador Michael Froman - Investigate China's Practices And Take Up Case Against China's Aluminum Subsidies

Letter

Dear Ambassador Froman:

We write to express our concern about China's persistent unfair trade practices that have led to significant excess capacity in the global aluminum sector and are undermining the entire U.S. aluminum value chain, including producers of primary aluminum and extruded aluminum products. We urge the Administration to bring swift and formal action against China's unfair trade practices at the World Trade Organization (WTO) before U.S. manufacturers and their workers incur further irreparable harm.

Exponential growth in China's aluminum sector, fueled by heavily subsidized, government-directed lending, has had significant implications for the U.S. aluminum industry. China now produces more than half of the world's aluminum, a significant increase since 2007 when it accounted for only 30 percent of production worldwide. Each year since 2008, China has increased capacity and production beyond what its domestic market demands, leading to a 35 percent drop in global aluminum prices. At the same time, these price declines have led U.S. producers to take nine aluminum smelters offline since 2008, leaving only five currently operating in the U.S. and causing massive layoffs. Fifteen thousand workers in aluminum production have lost their jobs in the last decade, including 1,500 this year alone.

U.S. manufacturers of semi-finished aluminum products have also faced significant market distortions as a result of China's excess capacity. In 2010, aluminum extruders filed trade cases in response to the flood of Chinese imports. Final determinations by the Commerce Department and the International Trade Commission resulted in antidumping and countervailing duties levied against Chinese aluminum extrusion products as high as 374 percent. While the trade cases helped domestic producers recover from China's unfair trade practices, concerted circumvention efforts by Chinese producers continue to disadvantage and harm U.S. companies. By collapsing the U.S. primary aluminum industry, China has also made downstream producers like the U.S. extruders less competitive by forcing them to pay more to import primary aluminum.

China's extensive subsidization of its aluminum sector has contributed significantly to global excess capacity and export surges in its aluminum sector. With significant government support, Chinese companies are allowed to operate at losses or otherwise independent from market considerations. The Commerce Department identified more than 20 government programs that subsidize Chinese aluminum extruders. News reports have identified government reductions of energy bills and tens of millions of dollars in cash infusions to help Chinese primary aluminum producers. And despite continued price drops in the global market, Chinese capacity is expected to increase in the next several years.

China's subsidies appear to be in violation of China's WTO obligations and threaten the entire U.S. aluminum sector. They have caused significant price suppression worldwide and have adversely affected U.S. interests. A strong aluminum sector is critical to U.S. manufacturing and to our national security. We urge you to quickly bring a WTO case against these subsidies before they further harm U.S. companies and their workers.

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