'Overcapacity' debate needs a global perspective

The United States administration's campaign against "overcapacity" has turned a complicated economic question into a geopolitical tool. Tariffs are presented as remedies for distortions, while the evidence to justify them and their economic consequences are brushed aside.

Yet it declared it was "severely disappointed" after the two-day G20 trade ministers' meeting that concluded on Thursday in Milwaukee, Wisconsin, failed to produce the support it sought for its campaigns against so-called "overcapacity" and "forced labor". This follows its similar push for backing for its campaign against "trade imbalances" at an earlier meeting of G20 finance ministers and central bank governors it hosted in Asheville, North Carolina, from Aug 31 to Sept 1.

Industrial capacity is not a problem that can be diagnosed by looking at a single country's exports, still less by attaching a political label to them. It requires comprehensive, objective and dynamic analysis from a global perspective. The real danger is not that countries trade with one another, but that trade becomes hostage to political disputes.

As Li Chenggang, China's international trade representative and vice-minister of commerce, said in Milwaukee, governments should explore cooperation rather than manufacture confrontation and address trade and economic issues through multilateral cooperation.

It is estimated that roughly 72 percent of the global merchandise trade still takes place under the World Trade Organization's most-favored-nation tariff conditions. The principle, which requires members to extend qualifying trade advantages to all WTO members rather than discriminate arbitrarily between them, remains a foundation of the WTO system. In an unsettled world, preserving it offers businesses and governments a measure of predictability that bilateral pressure undermines.

It is within the World Trade Organization that members can negotiate reciprocal adjustments, rather than through a proliferation of tariffs and politically defined exceptions.

The European Union's trade debate with China illustrates the danger of a narrower view. The EU runs a goods trade deficit with China, but it maintains an overall trade surplus globally. Bilateral figures alone cannot explain the wider relationship. Roughly half of China's exports to the EU consist of intermediate goods used in EU manufacturing, helping companies reduce costs and improve efficiency. The EU's restrictions on high-technology exports to China also constrain the composition of bilateral trade. These factors deserve consideration alongside concerns about competitive pressure on particular industries.

China is a major trading partner for more than 160 countries and regions. Its importance reflects commercial interdependence that cannot be understood simply through the language of confrontation. As Li urged in Milwaukee, G20 members should uphold multilateralism, strengthen the WTO-centered trading system and safeguard MFN treatment as a cornerstone of global trade.

The absence of a comprehensive joint statement in Milwaukee was not proof that dialogue had failed. Ministers still had a forum for direct exchanges, and Li held bilateral discussions with counterparts from the US, the EU and other major economies. Such conversations may be less dramatic than declarations of unity, but they are often more useful. It is encouraging that the G20 members attending the meeting expressed support for reducing trade barriers and jointly maintaining stable and smooth food production and supply chains.

In trade, cooperation is hard enough to achieve without making agreement a test of political loyalty. The US administration should treat the G20 meetings as a venue for searching for common ground, not as an opportunity to demand allegiance.

China firmly opposes the pursuit of unilateralism and protectionism under the pretexts of addressing so-called "overcapacity" or eliminating "forced labor". But it is willing to engage in dialogue and cooperation on industrial policies, strengthen policy coordination and build mutual trust to promote the healthy and sustainable development of global industries.