G20 trade chiefs to denounce food trade coercion but not excess factory capacity

By David Lawder

MILWAUKEE, Oct 1 (Reuters) - G20 trade ministers agreed on Thursday to denounce the weaponization of food through coercive trade actions, but failed to reach consensus on statements denouncing forced labor in supply chains and on addressing structural excess industrial capacity, U.S. Trade Representative Jamieson Greer said.

Greer told a news conference that many of the G20 trade ministers meeting in Milwaukee expressed concerns about excess industrial capacity, particularly in China, that is flooding their markets with cheap exports.

"Nearly all countries agree that this is an issue that requires action, and nearly all countries agree that our current system of trade remedies or responses is inadequate to solve this problem," Greer said, adding that is why the US has taken unilateral tariff action to protect its industries.

He did not name countries objecting, but China had objected to a similar G20 statement denouncing forced labor and non-market economic policies that lead to excessive exports at a finance leaders' meeting a month ago in Asheville, North Carolina.

"In the United States, we will continue to have discussions on this topic with like-minded trading partners well beyond Milwaukee," Greer said.

The G20 ministers also discussed a US proposal for a sweeping reform of the Most Favored Nation system of published unconditional tariff rates that has underpinned global trade since the end of World War Two. This is a new topic for the G20, as past discussions on MFN tariffs have taken place within the World Trade Organization.

Greer said the US did not propose a joint G20 statement on MFN tariff reform because it was a longer-term conversation that was important to start.

"So for us, we think that the principle of unconditional Most Favored Nation (tariffs) warrants reform," Greer said. "We think that it actually fails to promote reciprocity and balance in the trading system. It can actually create free riders."

The G20 is expected to release a joint statement denouncing food coercion later on Thursday.

EXPORT PRESSURE

European Trade Commissioner Maros Sefcovic told reporters separately that he was enthusiastic about discussing the need for "concentrated action" to tackle excess capacity because the problem has exploded over the past decade to the point where exports from China are threatening key industries in Europe, including autos and steel.

"Now we are at the stage where, because of these overcapacities and turbulence on the global market, (it) can create such flooding of the markets that whole sectors could be put in danger within a couple weeks or months," he told reporters.

China, a G20 member, has rejected claims that its industrial policies have created excess capacity, and accuses Western countries of using the issue to justify protectionist measures.

Greer also said that he had positive discussions with French, German and other European counterparts about cooperation to open up strategic diesel reserves to help push down high prices due to supply constraints.

"I think I won't put words in their mouth, of course, but I think they would love to have a cooperative path forward with the United States on how we get more diesel to market. Getting some of that diesel that's in the reserve is part of that equation."

He declined to directly address a Reuters report that US officials have warned France and Germany that they face a potential US diesel export ban if they fail to release emergency stocks of the fuel.

(Reporting by David Lawder; additional reporting by Ismail Shakil; editing by Michelle Nichols and Neil Fullick)