Milwaukee: G20 trade ministers failed to reach consensus on a U.S. proposal for cooperative action to tackle structural excess industrial capacity and production, exposing divisions among the world's major economies.
The disagreement emerged during the G20 Trade Ministers' Meeting in Milwaukee, Wisconsin, which ended on October 1. The United States holds the G20 presidency this year and had made structural excess capacity one of its main priorities for the meeting.
The US administration argues that some economies are producing more goods than markets can absorb, often with the support of government policies. Washington says this can push prices down, hurt producers in other countries and weaken domestic industries.
US Trade Representative Jamieson Greer said nearly all G20 members agreed that excess capacity was an issue requiring action. However, the countries could not agree on a common approach. The United States said a handful of members rejected a proposed pathway towards cooperative action, but it did not identify those countries.
China has strongly rejected the US approach, calling for a broader and objective assessment of excess capacity and greater cooperation on industrial policy. Beijing has also opposed using the issue to justify unilateral or protectionist trade measures.
India also set out a different approach. Commerce and Industry Minister Piyush Goyal said India does not have structural excess capacity in the sectors identified by the G20 presidency and called for trade distortions to be addressed through World Trade Organization rules.
India has also stressed the need to preserve policy space for developing countries as they expand manufacturing and participate more fully in global supply chains.
The disagreement over excess capacity was not the only issue that exposed divisions at the meeting. G20 ministers also failed to reach consensus on eliminating goods made with forced labour from global supply chains.
The United States, Mexico and Argentina issued a separate statement calling for greater cooperation to eliminate such goods. The broader G20 group did not reach consensus on the issue.
The United States has already taken trade action linked to forced labour concerns. Washington is also conducting a separate Section 301 investigation into 16 economies over concerns about excess industrial capacity and production.
The investigation covers China, India, Japan, South Korea, the European Union, Mexico, Indonesia, Malaysia, Thailand, Vietnam, Taiwan, Bangladesh, Cambodia, Singapore, Switzerland and Norway.
The investigation could become important for future US trade policy. No new tariffs linked to that investigation were announced at the G20 meeting.
Despite the disagreements, the ministers did reach agreement on one major issue. The G20 adopted a statement opposing the use of food and agricultural trade as a tool of economic or political pressure.
The agreement says food and agricultural products should not be used to exert coercion over another country. The issue was one of the main priorities of the US presidency and was the major trade issue at the meeting to produce a consensus statement.
The ministers also discussed possible reform of the Most Favoured Nation principle, a central rule of the global trading system. The United States argued that the principle should be reconsidered to better address what it sees as unfair trade practices. Some members indicated openness to considering changes, but no agreement was reached.
The dispute over excess capacity is not new. G20 governments have discussed the issue since at least 2016, particularly in relation to steel. G20 leaders have previously recognised concerns about excess capacity and the possible impact of government support and market distortions on global trade.
Separately, members of the Global Forum on Steel Excess Capacity agreed on a new framework for addressing excess steel capacity. The OECD expects global steel excess capacity to rise from 601 million tonnes in 2024 to 745 million tonnes by 2028.
The separate steel agreement does not mean that the wider G20 has reached agreement on structural excess capacity.
The Milwaukee meeting produced agreement on food trade coercion but exposed continuing divisions over industrial production, forced labour and the future of global trade rules. Further action on excess capacity will now depend largely on national trade policies and ongoing investigations rather than a common G20 agreement.