Some G20 trade ministers sign US-led statement denouncing excess factory capacity

G20, EU, and Allies Urge Action Against Non-Market Factory Overcapacity

Global Trade Leaders Address Structural Excess Capacity

By David Lawder

Joint Statement on Excess Factory Capacity

WASHINGTON, Oct 7 (Reuters) - Trade ministers from a dozen G20 countries along with the European Union and Poland signed on to a US-led statement calling for action to eliminate structural excess factory capacity and the "non-market" policies that encourage overproduction, the US Trade Representative's office said on Wednesday.

The joint statement from the market-oriented economies was agreed by senior officials on the sidelines of an OECD Trade Committee meeting. A US-led meeting of Group of 20 trade ministers in Milwaukee last week failed to reach consensus on the topic of excess industrial capacity.

Key Points from the Statement

"We call on all countries to take steps to eliminate structural excess capacity and production in their economies, including by ending the use of non-market policies and practices that distort markets and contribute to the problem," the trade ministers said in the statement.

"We note that in the absence of such steps, an increasing number of countries are taking action to defend their industries, workers, and economies from distortions resulting from such policies and practices."

Signatories and Notable Absences

The statement was signed by the trade ministers of Argentina, Australia, Canada, the European Union, France, Germany, India, Italy, Japan, South Korea, Mexico, Poland, Turkey, Britain and the United States.

Notably absent from the joint statement were G20 members China, Brazil, Indonesia, Russia, Saudi Arabia and South Africa.

Impacts and Reactions

Consequences of Structural Excess Capacity

The statement said structural excess capacity and production lead to overproduction, deter market-based investment and undermine market-based exports, distorting prices and production patterns and stymieing competition.

US Perspective and China's Response

US Trade Representative Jamieson Greer has long argued that structural excess capacity in China fueled by state subsidies has led to a flood of Chinese exports that are putting pressure on domestic industries in all regions.

China has rejected claims that its industrial policies have created excess capacity, and accuses Western countries of using the issue to justify protectionist measures.

Comments from US Officials

Greer said in a statement it was not surprising that countries hit with growing trade deficits or feeling other pressure due to exports fueled by excess capacity had committed to collective action. "The global trading system is completely out of whack, and President Trump is fixing it with likeminded partners," he added.

(Reporting by David Lawder; Editing by Nia Williams and Chris Reese)