G20 Split Over Excess Capacity as Only Two Back US Forced-Labour Call
A “handful” of G20 members rejected American calls to curb excess industrial capacity and “non-market” policies at a trade meeting in Milwaukee, the US Trade Representative’s office said on Friday, exposing deep divisions within major economies over G20 excess capacity policy.
The US, which holds the G20 chair this year, issued the statement on Friday, a day after the meeting. Just two members, Mexico and Argentina, had backed the American draft urging deeper joint action to keep forced-labour goods out of supply chains.
Why the G20 excess capacity statement stalled
The rejection comes on top of Trump administration tariffs, set at 10% or 12.5%, applied to goods from 59 countries and the EU over claims that they do not enforce forced-labour bans properly.
The USTR office is also running a second Section 301 tariff investigation covering 16 trading partners where signs of excess industrial capacity have appeared. Fresh duties are expected in the coming months.
The US statement did not name the objectors. But China had opposed a similar G20 statement denouncing forced labour and non-market policies that drive excessive exports, at a finance leaders’ meeting a month ago in North Carolina.
“The draft ministerial statement was supported by all but a handful of members, a few of whom firmly rejected creating this pathway towards cooperative action” on excess capacity, the statement said, adding that this “severely disappointed” the US G20 presidency.
China’s industrial capacity and subsidies have been recurring themes of the US-led G20 ministerial meetings this year. Beijing rejects claims that its industrial policies created excess capacity, accusing Western countries of using the issue to justify protectionism.
Ministers agree to condemn food trade weaponisation
The meeting did produce consensus on one front: G20 trade ministers agreed to denounce the weaponisation of food trade, accepting that food and agricultural inputs should not be used as tools of economic or political coercion.
The joint statement defined food weaponisation as measures to “slow, stop, block or direct the flow of food and agricultural inputs” to extract unrelated geopolitical concessions. “We condemn food weaponisation as it poses a significant humanitarian and economic threat,” they said.
Diesel reserves and the midterm backdrop
Separately, the Group of Seven agreed on Friday to release about 100 million barrels of diesel reserves to try to bring down record-high US diesel prices, a fuel widely used in agricultural production.
The move followed pressure from President Donald Trump, including the threat of a US ban on diesel exports. Washington had pressed the European Union to draw down its emergency diesel inventories, warning that failure to act could trigger the ban. Such a ban could sharply cut supplies to Europe, which has grown increasingly reliant on US diesel.
Trump is trying to cool surging fuel prices ahead of November’s mid-term elections. Speaking to reporters at the White House before departing for Alabama, he said the US would not impose the diesel export ban, adding that the plan was never really on.
What happens next on G20 excess capacity
US Trade Representative Jamieson Greer said he had not sought a joint statement on a fourth topic: reforming the “most favoured nation” system of published, unconditional global tariff rates underpinning the World Trade Organisation. Greer has argued that MFN rules have been abused by non-market-oriented economies such as China, which subsidise industries while the rules block differential treatment. Washington says some G20 members are open to changes, including wider exceptions and new legal readings of the rules.
FAQs
What is the G20 excess capacity dispute about?
The US wants G20 members to commit to curbing excess industrial capacity and non-market policies, pointing at China’s state-subsidised industries. A handful of members rejected the US draft statement at the Milwaukee trade meeting.
Which countries backed the US forced-labour statement?
Only Mexico and Argentina signed the US-led statement calling for more cooperation to eliminate goods made with forced labour from supply chains.
Did the ministers agree on anything?
Yes. They agreed to condemn the weaponisation of food trade: food and agricultural inputs must not be used as tools of economic or political coercion.
