U.S. Launches Trade Investigation Into India and 15 Other Economies Over Industrial Overcapacity

WASHINGTON — The United States has launched a broad trade investigation targeting India and 15 other economies over concerns about excess industrial capacity in key manufacturing sectors, a move that could potentially lead to tariffs or other trade actions.

The probe was announced Wednesday by U.S. Trade Representative Jamieson Greer, who said the investigation will examine whether government policies in several economies are encouraging production and exports beyond what global demand would normally justify.

“Our view is that key trading partners have developed production capacity that is really untethered from the market incentives of domestic and global demand,” Greer said during a press call.

“This excess capacity leads to, among other factors, overproduction and larger persistent trade surpluses, as well as underutilised and unused capacity, particularly in manufacturing sectors,” he added.

The investigation will be conducted under Section 301 of the Trade Act of 1974, which allows the U.S. government to respond to foreign practices considered unreasonable or discriminatory if they restrict or burden American commerce.

In addition to India, the economies included in the probe are China, the European Union, Singapore, Switzerland, Norway, Indonesia, Malaysia, Cambodia, Thailand, South Korea, Vietnam, Taiwan, Bangladesh, Mexico and Japan.

Greer said the review will examine a range of indicators that could signal excessive production capacity.

“These countries may exhibit, again, signs of excess capacity through a variety of means, their own current account surpluses, their bilateral trade surplus with the United States, underutilised or unused capacity, or overproduction in these economies,” he said.

Officials also pointed to government policies that could encourage manufacturers to expand output beyond normal market forces.

“This can include, for example, promoting production and exports untethered from economic drivers of supply, demand, and investment, including through subsidies,” Greer said.

Other factors under scrutiny include state involvement in industries, financial support measures and market barriers that may encourage production beyond domestic demand.

The Office of the U.S. Trade Representative said the investigation will proceed through a formal process that includes consultations with governments, public comments and hearings before any decisions are made.

According to the timeline released by the agency, written comments and requests to participate in hearings can be submitted once a public docket opens March 17. Submissions must be filed by April 15 to be considered.

Public hearings before the interagency Section 301 Committee are scheduled to begin May 5 in Washington.

After reviewing written submissions, testimony and consultations with the governments involved, USTR will determine whether any foreign policies violate U.S. trade law and whether trade measures are warranted.

Greer said the administration is still at an early stage in the process.

“We are going to initiate this investigation… to understand better and address these problems and to also get a very good handle on the drivers of these issues, which may vary from country to country,” he said.

U.S. officials say excess manufacturing capacity has become an increasing concern in global trade because it can lead to persistent trade surpluses and production that outpaces demand, potentially weakening industries in other economies and discouraging domestic investment.

The investigation will examine several manufacturing sectors, including automobiles, steel, electronics, chemicals, machinery and solar modules, where policymakers say overcapacity has become a recurring issue in global markets. (Source: IANS)