Share

Policy recommendations of the GFSEC

Framework conditions

1. Members should consider the extent to which their framework conditions and institutional settings ensure proper market functioning and policy objectives consistent with the need for reducing global excess capacity.

2. Particular attention should be given to ensure that:

  • i) competition law, trade and investment policies, and other policies foster a level playing field for competition among companies irrespective of ownership, both domestically and internationally;
  • ii) bankruptcy legislation is effective and procedures are expedited efficiently;
  • iii) the internal financial market is able to price risk and deal with non-performing loans;
  • iv) labour markets and social security systems adequately support adjustment;
  • v) different levels of government do not have conflicting policy objectives; and
  • vi) Procurement policies should not contribute to excess capacity.

Market-distorting subsidies and other support measures by government or government-related entities

1. Members should remove and refrain from adopting market-distorting subsidies and other support measures provided by governments and government-related entities that encourage companies to undertake capacity expansion projects, maintain consistently loss-making or uneconomic steel plants in the market, or which otherwise distort the market.

2. All Members should expeditiously share data on market-distorting subsidies and other support measures by government or other government related entities. The proper implementation of subsidies and other support measures that facilitate permanent closures of steel facilities should be carefully analysed and follow strict guidelines.

3. Governments should remove and refrain from market-distorting subsidies and other support measures by government or government-related entities that contribute to excess capacity.

4. Governments may encourage innovations in the steel sector and implementation of best available technologies among steel producers irrespective of ownership insofar as this does not distort competition and contribute to excess capacity.

Fostering a level-playing field in the steel sector

1. Irrespective of ownership, all enterprises acting in the steel market (whether privately-owned or directly or indirectly owned, fully or in part, by their governments or by government- related entities) should not receive subsidies or any other types of support that distort competition by contributing to excess capacity.

2. All enterprises acting in a country’s steel market should follow the same rules and regulations with economic implications, including bankruptcy procedures.

3. A level playing field should be ensured among steel enterprises of all types of ownership.

Fostering industry restructuring by assisting displaced workers

1. Governments should favour active labour market policies which maintain and increase the employability of workers who are dismissed as a result of the restructuring.

2. Employment adjustment measures are an important instrument for addressing the social cost of restructuring. This should be provided as support to workers and should not constitute subsidisation to companies, which could maintain existing capacities in place.

3. The specific needs of older workers and other disadvantaged groups affected by restructuring should be taken into account to facilitate their transitioning into alternative occupations.

4. The effectiveness and efficiency of the measures should be evaluated.

Government targets

1. Steel excess capacity is a global issue which requires attention in a global format with broad participation of economies. To support these, Global Forum members may set and publish goals, as appropriate, to reduce excess capacity through legal and market methods. Capacity reduction targets should be accompanied by actions to eliminate policies that contribute to excess capacity, such as market-distorting subsidies and other types of support by government or government-related entities.

2. The criteria for capacity reductions should, irrespective of ownership, stimulate the process of market selection with consistently loss making or non-environmentally compliant firms being forced to exit the market. Ex-post assessments of whether this is the case should be undertaken.

3. Government objectives to increase capacity should not be accompanied by market-distorting subsidies or other types of support by government or government-related entities that contribute to excess capacity, including input support to steel production.

4. Government targets should take into consideration demand conditions.

Issues related to mergers and acquisitions

1. Mergers and acquisition should not contribute to excess capacity.

2. Any measures taken to encourage mergers and acquisitions need to be taken in accordance with effective competition law and market principles.

Ensuring export credits do not contribute to excess capacity

1. Members should refrain from issuing officially supported export credits for steel plants and equipment which contribute to the expansion of global steel capacity that would not otherwise take place but for such subsidisation or not be in line with global steel demand.

2. When such support is provided, the terms and conditions of officially supported export credits for steel plant and equipment should be transparent, reflect market pricing and practices, and take note of guidelines agreed among some members and on-going international negotiations. This will minimise the subsidisation associated with export credits, and thus avoid supporting the creation of additional steelmaking capacity.

Enhance transparency

1. Members should regularly update the information on sectoral trends (incl. capacity developments and production) and policy measures. 2. The Global Forum should regularly analyse, review, assess and discuss how the provided information aligns with the agreed principles. i) Continue the process of the Global Forum 1. The Global Forum will meet at least three times per year to further discuss, assess and review this information, to ask questions and provide answers and share best practices thereon. The Argentinian G20 presidency foresees to hold three meetings in 2018.

2. As the priority for 2018, the Global Forum members should swiftly and fully apply the agreed principles and recommendations.