Competitive Tensions in the Steel Industry, Lessons from Mexico

The National Competition Commission said that the competitive tension in the steel industry in Mexico in 2024 is a lesson for Vietnam in competition management.

At the heart of the international trade controversy

The National Competition Commission (Ministry of Industry and Trade) informed that in 2024, the steel industry in Mexico became the center of an international trade dispute when Zekelman Industries - one of the largest steel pipe manufacturers in North America, accused steel companies in Mexico of serious violations of competition regulations.

The charges focus on Mexican companies using non-transparent measures, receiving subsidies from the government and implementing unfair competitive strategies, causing great harm to the US steel industry and disrupting the fairness of regional trade.

Zekelman Industries asserts that some steel companies in Mexico illegally lower their prices through opaque subsidies from the Mexican government. This creates a major imbalance in the North American market, making it impossible for U.S. steel companies to compete.

Specific allegations include illegal price-cutting, in which Mexican steel companies are accused of using practices that reduce prices below their true value, causing their U.S. competitors to lose competitiveness.

Along with that, there are accusations of receiving subsidies from the government. The non-transparent subsidies are said to unfairly reduce the cost of Mexican steel products.

The case is further alleged to violate agreements in the United States-Canada-Mexico-Canada Agreement (USMCA), undermining fair competition in the region.

“The consequences of these actions have been severe, with the U.S. steel industry facing significant financial pressure, forcing many businesses to cut production and jobs. In addition, price manipulation and subsidies have undermined the ability of U.S. businesses to innovate and invest in the long term, causing significant damage to the regional supply chain,” Zekelman Industries alleged.

The Vietnamese Competition Investigation Agency said that the reactions from the parties in the case clearly showed the opposition. Accordingly, Mexican steel companies denied all accusations from Zekelman Industries. They affirmed that all their business activities fully complied with international trade regulations and that this accusation was more protectionist than protecting fair competition. "The Mexican government also spoke out to protect domestic enterprises, emphasizing that their support measures were legal and aimed at promoting the domestic economy," said the National Competition Commission.

Steel is considered one of the strategic industries. Illustration photo

Meanwhile, Zekelman Industries continues to call for intervention from regulators in the United States and Mexico. “We need a fair market where businesses can compete on the basis of quality and efficiency, instead of being overwhelmed by non-transparent measures,” the company said.

Meanwhile, trade organizations and manufacturers in the United States also expressed support for Zekelman Industries' allegations, demanding a transparent investigation and strict sanctions if violations are found. This lawsuit not only increases tensions in trade relations between Mexico and the United States but also raises concerns about the stability of the steel supply chain in the North American region.

The National Competition Commission said the case has put the Mexican steel industry in a difficult position, as businesses face pressure to improve transparency in operations and meet requirements from international regulators. Meanwhile, steel companies in the United States are calling for government support to maintain their competitive advantage.

The uncertainty caused by the lawsuit could have a major impact on the steel supply chain in the region. The investigation and settlement of the allegations could increase production costs and extend delivery times, putting more pressure on both sides of the industry. “Given the strategic role the steel industry plays in the regional supply chain, any disruption would have a significant impact on other industries such as construction, automobiles and machinery manufacturing,” the National Competition Commission said.

Valuable lessons in managing and monitoring strategic industries

The Vietnam Competition Investigation Agency said the lawsuit between Zekelman Industries and Mexican steel companies is not only a regional trade dispute but also provides important lessons for other countries, especially in balancing fair competition and economic protection.

It is a matter of transparency in subsidies: Governments need to ensure that subsidies and support for businesses strictly comply with international regulations and avoid distorting markets.

Next is fair competition: Businesses need to focus on improving product quality and production efficiency, instead of relying on unfair competition measures.

Finally, close supervision: The role of regulatory agencies is crucial in detecting and handling violations, ensuring that the market operates transparently and fairly.

For Vietnam, the National Competition Commission said that this case provides valuable lessons in the management and supervision of strategic industries such as steel, textiles and wood processing. Because in the context of increasingly deep international integration, Vietnamese enterprises are facing increasing competitive pressure, both domestically and in the international market.

Therefore, strengthening supervision is very important. “Vietnam needs to build an effective supervision system to promptly detect and handle unfair competition behaviors, including illegal subsidies and price manipulation,” said the Competition Investigation Agency.

In addition, competition based on value should be encouraged. Accordingly, businesses should be encouraged to improve the quality of products and services, instead of relying on non-transparent competitive measures. In particular, cooperation with international regulatory agencies will help Vietnam learn from experience and improve its management capacity; at the same time, ensuring that free trade agreements are implemented fairly.

The dispute between the Mexican steel industry and Zekelman Industries is a clear illustration of the importance of transparency and fair competition in international trade. Given the strategic role that strategic industries play in economic development, governments and businesses need to work closely together to ensure that markets operate on the principles of fairness and transparency.

“For Vietnam, this is an opportunity to improve the management system and strengthen the enforcement of the Competition Law, in order to create a healthy and sustainable business environment. Protecting the rights of businesses and workers not only helps promote economic development but also enhances Vietnam's position in the context of global integration. A transparent and fair market is the foundation for ensuring sustainable development and long-term prosperity,” the National Competition Commission affirmed.

Mr. Dinh Quoc Thai - General Secretary of the Vietnam Steel Association (VSA) - said that steel is a product that is often involved in trade defense cases. Accordingly, Vietnam's steel industry has faced trade defense lawsuits early on, the earliest of which was in 2004 when the European Commission (EC) initiated an anti-dumping lawsuit against Vietnamese steel pipes.

Since then, according to statistics from VSA, foreign markets have filed a total of 81 trade defense lawsuits against Vietnam's exported steel.

Source: https://congthuong.vn/cang-thang-canh-tranh-trong-nganh-thep-bai-hoc-tu-mexico-369382.html