India and 13 other countries have called for coordinated international action to address structural excess industrial capacity and production, warning that persistent overproduction can distort markets, hurt domestic industries and affect workers.
A joint ministerial statement signed by 15 economies including India and the United States was released on October 7 after discussions among G20 Trade Ministers in Milwaukee, Wisconsin, on September 30 and October 1.
The signatories are Argentina, Australia, Canada, the European Union, France, Germany, India, Italy, Japan, South Korea, Mexico, Poland, Türkiye, the United Kingdom and the United States.
Structural excess capacity can lead to overproduction and excessive concentration of manufacturing in certain economies, the countries said. Such conditions can distort prices and production patterns, discourage market-based investment and undermine competition, according to World Bank research.
Autos, EVs, Batteries And Solar Panels.
The participating economies identified several manufacturing sectors where they are concerned about existing or projected excess capacity.
These include automobiles and electric vehicles, batteries, chemicals, foundational semiconductors and solar panels.
If excess production were not controlled, it would threaten local manufacturing, affect jobs and make economies more dependent on products from countries with large production capacities.
The participating countries also expressed concern that government subsidies and other non-market arrangements may create excess capacity by encouraging production that would not be possible in a normal market condition.
The issue has become more and more important in the global trade discussions as countries seek to protect domestic manufacturers from what they call artificially low-priced imports and market distortions.
The United States has been particularly vocal about it and US Trade Representative Jamieson Greer has called for action to address the issue, and argued that the excess capacity can sap domestic industries and workers.
India Says Industrial Capacity Itself Is Not The Problem
India's position on the issue has been taken with a very important qualification.
At the G20 Trade Ministers' meeting, Commerce and Industry Minister Piyush Goyal said industrial capacity by itself would not be the cause of the problem. The issue is when production is geographically concentrated because of hidden subsidies and other forms of government support.
Goyal said India does not have structural excess capacity in the sectors identified by the G20 presidency. He also stressed that concerns about dumping and predatory pricing should be addressed through evidence-based, WTO-consistent instruments such as anti-dumping and countervailing duties.
India has also pushed for diversification of global supply chains and production capacity, while cautioning that diversification should not become a justification for measures that violate World Trade Organization rules or place the adjustment burden on developing economies.
Thus, India’s participation in the joint statement does not mean New Delhi has accepted the argument that simply having large manufacturing capacity constitutes a trade problem.
Countries are planning new sector-specific platforms to be implemented.
The 15 countries have also agreed to work together through new sector-specific platforms to evaluate structural excess capacity and explore possible solutions.
The first focus will be on automobiles and electric vehicles, batteries, chemicals, foundational semiconductors and solar panels.
Senior officials have already started discussions on the issue alongside the OECD Trade Committee.
The countries intend to meet at the technical level before December 2026 to develop terms of reference, share non-confidential information and data, and identify gaps in existing knowledge about excess capacity and its effects.
They would also look at ways to help economies cope with the negative impact of excess production on trade and workers.
The statement also invited other countries, both within and outside the OECD, to participate in the work.
Why global industrial overcapacity is a problem?
Structural excess capacity occurs when production capacity is persistently above what market demand can absorb. If production is supported by policies that maintain inefficient capacity as long as they are in place, the excess supply can take the price down and make it harder for producers in other countries to compete.
The problem is not new. G20 countries discussed excess capacity in sectors like steel as early as 2016 and recognised how that impacts trade and workers. Recently the problem has worsened in some areas, the report says.
For India, the debate is particularly significant as the country is currently expanding its manufacturing base and looking for a bigger role in global supply chains.
New Delhi wants to attract investment and diversify production while also protecting domestic manufacturers from unfair trade practices. At the same time, India has stressed that trade remedies should be WTO-compliant and based on evidence rather than broad assumptions about a country's manufacturing capacity.
The joint statement is an attempt by major trading countries to synchronize their responses to each other’s tariffs instead of being reactive, as the tariffs are not enough in their own right.
Whether this initiative will actually make any concrete changes in the global manufacturing patterns will depend on the technical discussions and sectoral actions that follow in the coming months.
