Should a trade battle result from the application of a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminium by the Trump Administration in the US, rather sooner than later, world trade as a whole may become seriously impaired.
Mauricio López Dardaine
SouRce: Bridges
,
US Trading Partners Weigh Next Steps After Steel, Aluminium Tariff
Announcements
15 March 2018
The state of the
global steel and aluminium sectors has come under renewed focus in recent
weeks, as various major exporters have been holding talks with US officials
following Washington’s confirmation last week that it would be setting hefty
tariffs on steel and aluminium later this
month.
The announcement,
along with the broader challenges that face these industrial sectors, has also
prompted calls for additional cooperation among major producers and exporters.
Meetings of international committees and forums devoted to the steel sector are
already planned for the coming months, with that objective in mind.
US tariffs confirmed; countries discuss exemptions
The new US tariffs
have been set up under Section 232 of a 1960s era trade law, known as the Trade
Expansion Act. Section 232 refers to the provision under which the US Commerce
Department can conduct trade probes on whether imports are negatively affecting
the country’s national security, with the US president then being able to act
on the agency’s recommendations if they choose.
The steel and
aluminium tariffs are due to take effect from 23 March, lasting for an
unspecified period of time. According to the proclamations, the Secretary of
Commerce is due to release details on how countries may request exemptions
within 10 days of the proclamation being signed – in other words, by the end of
this weekend.
In response to US
President Donald Trump’s decision to sign off on the tariffs, Secretary of
Commerce Wilbur Ross said that these were
“the result of a long and well-thought-out process” undertaken by his agency.
One week prior to
the signing, news of Trump’s intention to impose a 25 percent tariff on
imported steel and a 10 percent tariff on imported aluminium had already
prompted intense pushback, including by US lawmakers, manufacturers, and major
trading partners. It has drawn tentative support from some lawmakers, as well
as producers of US steel. (See Bridges Weekly, 8 March 2018)
The presidential
proclamations refer to the possibility of specific exemptions for countries,
subject to certain conditions. Specifically, Trump has called on countries to
pitch “alternative ways” to address the alleged national security risk from imported
steel and aluminium from that country.
Should Trump
“determine that imports from [specific] country no longer threaten to impair
the national security,” the proclamations allow for the White House to exempt a
country from those tariffs, or revise them.
Argentina,
Australia, Brazil, the EU, Japan, and South Korea are among those countries
which have indicated an interest in discussing other ways to address US
national security concerns and potentially avoid the new duties.
The proclamations
currently exclude Canada and Mexico, which are the US’ partners in the North
American Free Trade Agreement (NAFTA), from the tariffs. The documents
reaffirmed that Canada, Mexico and the US have a “shared commitment to
supporting each other in addressing national security concerns,” along with
citing other factors such as the deeply integrated nature of the North American
market.
Meanwhile, China's
Commerce Minister Zhong Shan told reporters in Beijing on Sunday that “China
does not want a trade war, nor will it actively initiate a trade war.” The
Asian economy is the world’s top steel producer, though only making up a small
portion of steel imports entering the US. China has previously indicated that
it is looking at ways to respond in coordination with other partners, should it
be affected by the new tariffs.
“However, we are
capable of handling any challenge, and we resolutely defend the interest of the
country and the people,” the Chinese official continued, according to comments
reported by CNN.
US, EU, Japan trilateral meet
Industrial
overcapacity also topped the agenda during a meeting this weekend between EU
Trade Commissioner Cecilia Malmström, Japanese Minister for Economy and
Industry Hiroshige Seko, and US Trade Representative Robert Lighthizer.
Trade ministers
from the EU, Japan, and US had met last December on the margins of the WTO’s
ministerial conference in Buenos Aires, Argentina, and subsequently issued a
brief statement promising to pursue “trilateral cooperation” to address
industrial overcapacity, referring to a list of “unfair market distorting and
protectionist practices by third countries.” (See Bridges Daily Update, 13 December 2017)
At this weekend’s
meeting, which was billed as a follow-up to the Buenos Aires talks, ministers
endorsed various initial joint actions
“to address non market-oriented policies and practices that lead to severe
overcapacity, create unfair competitive conditions for our workers and
businesses, hinder the development and use of innovative technologies, and
undermine the proper functioning of international trade.”
The actions include
collaboration on WTO disputes and within the global trade body’s committees;
improving the sharing of relevant information; working together on investment
screening; and otherwise collaborating in various steering bodies and coalitions,
naming among these the OECD, G7 and G20, and the Global Steel Forum on Excess
Capacity.
The EU-US-Japan
meeting also served as an opportunity for the EU and Japan to discuss the issue
of tariffs with the US, with both advocating for
exemptions. Officials are due to continue talks on the tariff issue this week.
“As a close
security and trade partner of the US, the EU must be excluded from the
announced measures. No immediate clarity on the exact US procedure for
exemption however, so discussions will continue next week,” said Malmström on
social media site Twitter on Saturday
after the meeting.
The EU has previously
made clear that, should it face negative ramifications from the US tariffs, it
will pursue three tracks of work. This include WTO dispute settlement
consultations in coordination with other trading partners; “WTO-compatible”
safeguard measures to protect against a potential surge in imported steel into
the EU; and the potential enactment of duties on a list of US products to
“rebalance benefits” given to the US in the past, and thus compensate the EU
for the economic loss caused by the US tariffs.
The last of these
would be conducted in line with WTO safeguard rules on compensation, according
to EU officials.
The WTO’s Agreement
on Safeguards outlines how countries can apply safeguard measures, including
the obligation that members have to “endeavour to maintain a substantially
equivalent level of concessions and other obligations to that existing under
[the General Agreement on Tariffs on Trade, or GATT] 1994 and the exporting
members which would be affected by such a measure.”
WTO rules also outline
terms for consultations on compensation, as well as the timeframe for affected
exporting members to then suspend concessions if no agreement is reached. (See
Bridges Weekly, 8 March 2018)
“The EU is entitled
use the WTO Safeguards Agreement to rebalance the benefits we have granted to
the US in the past,” said Malmström this
week in remarks to the European Parliament.
OECD steel committee chair: market improvements, though risks remain
Shortly before the
White House confirmed the steel and aluminium tariffs, the Organisation for
Economic Co-operation and Development (OECD) Steel Committee met to discuss the
state of global steel markets and related trade tensions.
Afterward,
committee chair Lieven Top issued a statement noting a
“modest improvement overall” in the state of the global steel market, while
noting that production increases at the country level vary.
Top also warned of
various risks facing the sector going forward. “A sustained and resilient
recovery remains unlikely as megatrends associated with lower steel intensity
(e.g. ageing population, digitalisation, climate change, and circular economy)
are likely to weigh down on long-term global steel demand.”
Another topic that
came up in the OECD meeting, according to Top, was that countries must be ready
to take “swift and resolute action, and avoidance of major trade disruptions,”
capitalising on the “improved conditions” seen in the sector.
The statement did
not refer specifically to the US, but it did note the continued “trade
frictions” involving steel.
“Trade tensions
continue to increase including recent announcements by members of the Steel
Committee, which are of strong concern given the potential impact and
implications,” the statement said.
Global steel forum: ministers to meet in June
OECD
Secretary-General Ángel Gurría said last week that the Global Forum on Steel
Excess Capacity, a mechanism that was set up during the Chinese G20 presidency
two years ago, will meet at ministerial level in June.
According to the
OECD chief, this meeting would be within the wider context of the current
Argentine G20 presidency. He also urged the forum to “accelerate” its efforts
to address the problem.
The forum had
previously met at ministerial level in late 2017, issuing a report with policy
recommendations for members to consider going forward.
Busy week in US trade policy
While the steel and
aluminium announcements dominated US trade headlines, other developments have
also emerged from Washington in recent days. This includes the swearing in of
some new trade officials, including Dennis Shea as the US’ WTO ambassador, Greg
Doud as Chief Agricultural Negotiator, and C.J. Mahoney as Deputy US Trade
Representative for Investment, Services, Labour, Environment, Africa, China,
and the Western Hemisphere.
Separately, the US also confirmed
on Wednesday that it had filed a request for consultations with India,
referring to specific export subsidy programmes which it claims are not in line
with global trade rules and which have implications for products such as steel,
chemicals and pharmaceuticals, textiles and apparel, and information technology
goods
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