AAM to USTR: Section 301 Investigation into Industrial Overcapacity is Warranted

The tool is uniquely suited to address an enormous problem that other trade enforcement measures can’t grasp, we argue in public testimony.

The Office of the United States Trade Representative (USTR) in March launched an investigation under Section 301 of the Trade Act of 1974 into global industrial overcapacity, that will look at 16 different economies and a broad swath of manufacturing industries. We’ve been slowly working our way through deeper looks at the capacity problems in some of those industries (you can find them here, here and here) as the larger investigation slowly progresses.

A 301 investigation is a process that takes months and solicits public engagement. And that’s where this overcapacity investigation was this week: The public comment period. Roughly 150 interested parties – trade attorneys, academics, policy experts and pundits – lined up to offer their opinions on behalf of USTR’s effort. And the Alliance for American Manufacturing (AAM) was among them.

You know where we stand on this stuff. As AAM President Scott Paul said when the 301 was announced: “Overcapacity is a serious problem. In some cases, such as Chinese autos and steel, it has wrecked economies and industries as well as cost jobs in America. We commend the administration for initiating these investigations, which we hope will lead to meaningful action to defend American workers and manufacturers.”

Our testimony during this week’s public comment period, however, got into more granular detail, and it comes with lots of sources and citations. You can read it here in full, but below is a snippet that lays out why Section 301 is the right trade tool for the U.S. government to pick up in this instance:

Section 301 is uniquely suited to address structural overcapacity, whereas conventional trade tools are often ill-equipped to confront systemic excess capacity sustained by government intervention, embedded in vertically integrated supply chains, and deliberately relocated across borders to evade existing measures. Where foreign government policies support production untethered from demand and externalize surplus through exports and third-country manufacturing, these acts, policies, and practices burden U.S. commerce through sustained price suppression, displacement of domestic production across finished goods and upstream inputs, distorted investment decisions, weakened supply-chain resilience, and the shifting of adjustment costs onto U.S. producers, workers, and communities.

Because these outcomes flow predictably from government intervention rather than market forces, the underlying acts and practices are unreasonable and actionable under Section 301.

Emphasis added. You can find the testimony here.