Korea joins 14 economies in pact against industrial overcapacity

Fifteen economies, including Korea, the United States, Japan and the European Union, have agreed to jointly tackle structural overcapacity in five industries, from electric vehicles and batteries to solar panels.

The joint statement names no specific country. But the United States and Europe have long accused Chinese companies of using heavy state subsidies to overproduce electric vehicles, batteries and solar panels and sell them cheaply around the world. The pact is therefore seen as a multilateral effort that, in effect, targets China.

Trade ministers of the 15 economies issued the statement Wednesday, timed to a meeting of the Organisation for Economic Cooperation and Development (OECD) Trade Committee in Paris, Korea's Ministry of Trade, Industry and Resources said Thursday.

The signatories are Korea, the United States, Japan, Britain, Canada, Australia, India, Argentina, Mexico, Turkey, the European Union, France, Germany, Italy and Poland. China is not among them.

Overcapacity was also a key agenda at the Group of 20 (G20) trade ministers' meeting held in Milwaukee, Wisconsin, last week. Many members shared the concern, but “a handful of members rejected creating a pathway toward cooperative action,” according to the chair's statement from the United States, which holds this year's G20 presidency. 

The United States and 14 other economies that share the concern then issued their own statement.

The signatories described structural excess capacity and production as a fundamental challenge for the global economy and for individual economies.

“We call on all countries to take steps to eliminate structural excess capacity and production in their economies, including by ending the use of nonmarket policies and practices that distort markets and contribute to the problem,” the statement said.

The economies picked five sectors for joint action: autos and electric vehicles, batteries, chemicals, foundational semiconductors and solar panels. Foundational semiconductors are the older-generation chips used widely in cars and electronics.

The 15 will set up a dedicated platform for each sector to analyze the scale of overcapacity and its effect on markets, and to discuss specific responses. The platforms will also be open to countries outside the OECD, as India and Argentina already are.

Officials will meet at the technical level before December to work out how the platforms will operate and to share nonconfidential information on overcapacity and its impact on their industries.

“We plan to take an active part in building the sectoral cooperation platforms and in follow-up discussions, and to work closely with major countries, to respond effectively to the global overcapacity problem,” a Ministry of Trade, Industry and Resources official said.

BY JEONG JAE-HONG [[email protected]]