US-Led Coalition Targets Global Factory Overcapacity

Trade ministers from 12 G20 nations, the European Union and Poland have backed a US-led initiative aimed at tackling structural excess factory capacity and trade-distorting policies that contribute to global overproduction.

The joint statement, signed Wednesday by a group of market-oriented economies, calls on countries to eliminate policies and practices that artificially boost industrial production and distort international markets. The agreement was reached by senior officials on the sidelines of an OECD Trade Committee meeting.

The move follows a US-led gathering of G20 trade ministers in Milwaukee last week, where participants failed to reach a broader consensus on excess industrial capacity.

According to the statement, governments should take steps to reduce structural excess capacity and production within their economies. This includes ending non-market policies and practices that encourage companies to produce more goods than market conditions would otherwise support.

Officials warned that failure to address global industrial overcapacity could prompt more countries to introduce measures designed to protect domestic industries, workers and economies from unfair competition and market distortions.

Argentina, Australia, Canada, the European Union, France, Germany, India, Italy, Japan, South Korea, Mexico, Poland, Turkey, Britain and the United States signed the statement.

Several major G20 economies did not join the initiative, including China, Brazil, Indonesia, Russia, Saudi Arabia and South Africa. The absence of those countries highlights continuing divisions among major economies over how to address industrial subsidies, excess production and other non-market economic practices.

The statement argued that structural excess capacity can fuel overproduction, discourage market-based investment and weaken competitive exports. It can also distort global prices and production patterns while reducing fair competition.

The US-led effort adds to growing international pressure to address industrial policies viewed as contributing to global supply imbalances. However, the lack of agreement among all G20 members suggests that reaching a unified approach to factory overcapacity and non-market trade practices remains challenging.