Steel Tariff Struggles Continue

Europeans and Japanese say that the Bush administration's latest partial climb-down on steel tariffs is insufficient.

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IHT Article Print Page: The European Union refused Friday to withdraw its threat of retaliation over U.S. steel tariffs, saying that Washington's most recent list of exemptions was encouraging but insufficient. Officials in Brussels said the EU would not drop its case against Washington at the World Trade Organization and would proceed with plans to hold a meeting next month to consider its options for retaliation...

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What happens when the Bush Administration loses its steel case in front of the WTO? I can see only two options: a complete climb-down by the Bushies (with political consequences in states like West Virginia that people like Karl Rove will think disastrous) or a lot of damage to the WTO as an honest broker.

U.S. retreat on steel fails to satisfy EU

Thomas Fuller International Herald Tribune Saturday, August 24, 2002

Threat to retaliate on tariffs remains PARIS PARIS:The European Union refused Friday to withdraw its threat of retaliation over U.S. steel tariffs, saying that Washington's most recent list of exemptions was encouraging but insufficient.

Officials in Brussels said the EU would not drop its case against Washington at the World Trade Organization and would proceed with plans to hold a meeting next month to consider its options for retaliation.

Washington has so far exempted about one-quarter of the total foreign steel hit by the tariffs, including a list of 178 products made public Thursday. About half of EU steel exports have been exempted.

"It's a step in the right direction but we certainly have not obtained all that our industry has requested," Salvatore Salerno, head of the unit for steel, coal and shipbuilding at the European Union's executive's trade directorate, said Friday.

The EU has effectively maintained its threat to retaliate against U.S. exports of citrus, textiles, steel and other products.

Japan also said Friday that it would not withdraw its complaint with the WTO despite the exemptions, but that it might consider dropping plans for retaliation.

After a four-week lull in the ongoing steel dispute, tensions may rise further next week. The U.S. International Trade Commission is due to decide Tuesday whether to levy a separate set of tariffs on high-end steel products exported by 20 countries, including major trading partners like China, France, Germany and Japan.

In a preliminary decision late last year, the commission, which is nominally independent from the government, decided unanimously to go ahead with so-called anti-dumping measures.

Imposing these separate tariffs less than a week after the exemptions Thursday could reinforce the notion in Europe and elsewhere that the United States is pursuing a confusing and contradictory trade policy.

President George W. Bush announced in March that the United States would levy a tariff of up to 30 percent on foreign steel products as a "safeguard" measure for ailing U.S. companies, raising the ire of Washington's biggest trading partners and best friends.

Since then the United States has progressively doled out more than 700 exemptions, including the ones announced Thursday.

The anti-dumping measures being considered Tuesday target "cold-rolled" steel - a more narrow category of steel than covered by the March measures. But the anti-dumping tariffs are likely to be set higher and could effectively shut out that particular type of foreign steel from U.S. markets.

By a strict economic definition, "dumping" means selling a product at a price lower than what it costs to make it. But anti-dumping measures are often used around the world to protect uncompetitive national industries from cheaper foreign products.

The U.S. steel industry, which is widely regarded as inefficient and in need of restructuring, has been hankering for greater protection for years.

The tariffs introduced in March have helped raise steel prices in the United States, allowing several U.S. companies to pull back from the brink of bankruptcy.

But big U.S. steel companies criticized the tariff exemptions announced Thursday. Tim Roberts, a spokesman for WCI Steel in Warren, Ohio, said in an interview with The Associated Press that the protective "safeguard" tariffs were being "gutted." The Bush administration now finds itself squeezed between angry U.S. steel companies on the one hand and disappointed allies on the other.

Although many U.S. companies have been given a temporary respite from collapse, Bush's steel tariffs have failed to deliver their desired results in several key areas, economists say.

The largest steel mills in the United States - generally the ones in the most trouble - have found it difficult to benefit from the current high steel prices because their prices are generally fixed into long-term contracts, according to Ben Goodrich, a steel expert at the Institute for International Economics.

The tariffs have also failed to produce a significant number of jobs for steel workers - and thus perhaps failed to win the crucial votes that Bush had sought when considering the tariffs.

"Steel workers haven't gained very much at all," Goodrich said. "We haven't seen hirings on a large scale." Other losers include companies that buy large amounts of steel for their businesses, including car-part manufacturers.

Outside the United States the main targets of the March tariffs - European and Asian steelmakers - have been much less affected than the rhetoric of governments would suggest.

Perhaps partly as a result of the U.S. tariffs and the barriers raised by other governments in response, prices of steel have risen in Europe.

Steel production rose 2.8 percent in the European Union, according to the Brussels-based International Iron and Steel Institute.

To the surprise of many analysts, European steel companies have continued to export to the United States despite the 30 percent tariff. With prices nearly 90 percent higher on common types of steel in the United States, the European companies can afford to pay the tariff and still produce a profit.

"Steel prices rose so far and fast in the U.S. that it didn't discourage people from importing steel," said Mark Burridge, a steel analysts with Merrill Lynch in London.

Mike Hitchcock, a spokesman for Corus, one of the largest European steelmakers, said: "The amount of profit we can get has diminished but not so much as you might expect. But it's affecting our customers who are having to pay more for the steel," he said.

Ultimately, economists agree that the biggest losers of the steel wars have been consumers who will ultimately pay higher prices for their cars and refrigerators.

"Consumers are definitely in the loser category no matter what," said Goodrich at the Institute for International Economics.

Copyright © 2002 The International Herald Tribune

 

Posted by DeLong at August 24, 2002 06:09 PM | Trackback