G/SCM/W/569  
 
14 October  2016 
(16-5573) Page: 1/2 
Committee on Subsidies and Countervailing Measures  
 Original: Englis h 
 
 THE CONTRIBUTION OF THE WTO TO THE G20 C ALL FOR  
ACTION TO ADDRESS CE RTAIN MEASURES  
CONTRIBUTING TO OVER CAPACITY  
 
The following proposal, dated 12 October  2016, is being circulated at the request of the 
Delegation s of the European Union, Japan, Mexico an d the United States . 
 
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Industrial overcapacity has become a major problem for the global economy. It negatively affects:  
 
 the economic situation of those countries in which overcapacity in certain industrial sectors 
occurs , 
 the economic si tuation of third countries, whose industries are adversely affected by the 
resulting oversupply.  
 
In this sense, overcapacity is a major cause of distortions to international trade and creates 
multiple negative externalities by stymying the development an d growth of nascent industries in 
other countries and/or leading to a decline of industrial activity where it already exists. In so 
doing, it has societal consequences which are a contributing factor to negative sentiment regarding 
international trade. Whi le some of the related policies may have been introduced by governments 
with a view to fostering such industrialisation and development, as well as safeguarding jobs, the 
longer -term effect is often lose -lose for both the source country as well as its trad ing partners as 
prices decline, production becomes uncompetitive and governments are faced with decisions in the 
context of possible social unrest and ever -strained budgets. This is a problem in a number of 
industrial sectors, including among others the  steel and aluminium sectors.   
 
The underlying problem was recognised by G20 Trade Ministers at their meeting in Shanghai ( 9-
10 July) and by G20 Finance Ministers at their meeting in Chengdu (23 -24 July). It was 
subsequently highlighted by G20 Leaders at the  Hangzhou summit (4 -5 September). Paragraph 10 
of the Shanghai Ministerial statement and paragraph 31 of the Hangzhou Summit communiqué 
clearly underscore and acknowledge the importance of collective action : 
 
We recognize that the structural problems, incl uding excess capacity in some 
industries, exacerbated by a weak global economic recovery and depressed market 
demand, have caused a negative impact on trade and workers. We recognize that 
excess capacity in steel and other industries is a global issue whic h requires collective 
responses. We also recognize that subsidies and other types of support from 
governments or government -sponsored institutions can cause market distortions and 
contribute to global excess capacity and therefore require attention.  
In fol low-up to this call for action from global leaders, and recognizing that there are a range of 
government policies that have likely contributed to the problem of overcapacity in different 
jurisdictions , the SCM Committee could usefully look more closely at the extent to which subsidies 
contribute to overcapacity and how they could be further disciplined in the interest of providing a 
level playing field for traders and an environment where trade and resource allocation is not 
distorted.  
 G/SCM/W/569  
 
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  While addressing ov ercapacity requires multifaceted and long -term solutions some of which go 
beyond the remit of the WTO, there are a number of possible trade -related measures that could be 
considered by WTO members to contribute to addressing subsidies that for example cont ribute to 
or aggravate overcapacity, not only in the steel industry, but also in other sectors such as the 
aluminium industry.  
 
In this context, it would be useful if a discussion in the SCM Committee could be launched among 
Members around the following i nitial questions:  
 
 To what extent have subsidies contributed to the creation of excess capacity?  
 What are the specific government or business practices that have contributed to the creation 
of excess capacity?  
 In what areas are current ASCM disciplines inc omplete or inadequate to address these 
practices?  
 
We look forward to discussing with other Members, including G20 Members, how to take forward 
this and other issues in view of the clear call for action by the G20.  
 
 
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