US demands China cuts excess steel '˜flooding' global markets

US envoys have pressed China to cut excess steel production that is flooding global markets and to reach a diplomatic settlement to territorial disputes in the South China Sea as the two sides opened a high-level dialogue.

Chinas steel industry is dumping steel on global markets, threatening jobs around the world. Picture: Getty Images

The annual meeting of Cabinet-level foreign affairs, trade and other officials from both sides is meant to head off conflict. Officials acknowledged differences on an array of issues but repeatedly stressed their interest in amicable co-operation and pledged to work together to see the Paris agreement on curbing emissions of climate-changing gases ratified by world governments.

The US agenda includes pressing Beijing to move faster with plans to shrink a bloated steel industry that its trading partners complain is flooding their markets with unfairly cheap exports, hurting foreign producers and threatening jobs. Washington has responded by imposing anti-dumping tariffs on steel, and European officials say they have launched a trade investigation.

“Excess capacity has a distorting and damaging effect on global markets,” US treasury secretary Jacob Lew said at the opening of the two-day event, “and implementing policies to substantially reduce production in a range of sectors suffering from overcapacity, including steel and aluminium, is critical to the function and stability of international markets.”

The annual Strategic & Economic Dialogue rarely produces agreements on major issues, but provides what officials on both sides say is a valuable setting to air disputes, clear up misunderstandings and share experiences.

This year’s event is led by Secretary of State John Kerry and Lew on the US side, and vice premier Wang Yang and state councilor Yang Jiechi on the Chinese side.

Beijing announced plans this year to slash the size of its state-owned steel and coal industries at a cost of millions of jobs. But plans for other bloated sectors, including aluminium, glass and solar panels, have yet to be announced.

Speaking at the event’s opening ceremony, Chinese president Xi Jinping promised action on reducing overcapacity but announced no new initiatives.