Bush safeguards US steel

US President George Bush took action on Tuesday to impose temporary safeguards to help give America’s steel industry and its workers the chance to adapt to what he called ‘the large influx of foreign steel’. The safeguards mean that the US would impose tariffs of up to 30% on steel imports into the US.

In a statement, President Bush said that the safeguards are expressly sanctioned by the rules of the World Trade Organization, which recognises that sometimes imports can cause such serious harm to domestic industries that temporary restraints are warranted.

‘I take this action to give our domestic steel industry an opportunity to adjust to surges in foreign imports, recognising the harm from 50 years of foreign government intervention in the global steel market, which has resulted in bankruptcies, serious dislocation, and job loss. We also must continue to urge our trading partners to eliminate global inefficient excess capacity and market-distorting practices, such as subsidies,’ President Bush said. President Bush added that the US steel industry must use the temporary help that his action provided to restructure and ensure its long-term competitiveness.

‘Restructuring will impact workers and the communities in which they live, and we must help hard-working Americans adapt to changing economic circumstances. I have proposed a major expansion of the National Emergency Grants program to assist workers affected by restructuring with effective job training and assistance. I have also proposed direct assistance with health insurance costs that will be available to workers and retirees who lose their employer-provided coverage. And I support co-ordinated assistance for communities and a strengthened and expanded trade adjustment assistance program. America’s workers are the most highly skilled in the world, and with effective training and adjustment assistance we will help them find better, higher paying jobs to support their families and boost our economy,’ he said.

‘Today’s rulings are the result of a fair, equitable process, involving extensive hearings and investigations into a complex situation, beginning in 1998 and continuing to this day to inflict severe damage on domestic steel producers, including those in Ohio,’ said James Cowan, co-chair of the Ohio Steel Council, a partnership designed to strengthen ties among the steel industry, the state of Ohio and its citizens.

Since 1998, three Ohio Steel Council member companies have declared Chapter 11 bankruptcy – LTV Steel, Wheeling-Pittsburgh Steel and Republic Technologies International. A fourth company, CSC, has closed its doors.

‘The Ohio Steel Council’s position remains the same as in 1998. We expect accurate, swift enforcement of existing trade laws and a level playing field on which we can compete with other countries for markets in the United States and abroad,’ Cowan concluded. But not everyone agreed. For its part, Eurofer, the European Confederation of Iron and Steel Industries, condemned the decision of the President on the relief action claiming that it was unfair, unwarranted, and likely to be counterproductive.

The decision, it said, appears to place a particularly heavy burden on EU exports, yet the record amply demonstrates that EU exports did not contribute to any injury the US producers might have suffered.

It also claimed that the decision is not economically justified: the imposition of extra tariffs fails to take into account the recent stark price increases on many products. What’s more, it claimed that the decision will endanger the early resumption of economic growth in the US. It will severely harm the US consuming industries which depend on imports and hamper their international competitiveness. It added that the decision also did nothing to address the root-cause of the US industry’s present problems; on the contrary, it said, it would further delay the long-overdue restructuring which is the fundamental reason for the present difficulties of the US industry.

Going one step further, Eurofer disageed with the President that the decision was WTO-consistent. As such, it claimed that the dispute settlement body will condemn it.

Indeed, the WTO Safeguard Agreement requires that increased imports be identified as the cause of serious injury to the domestic industry. The strong decrease in imports in the US since mid-2000 to the lowest level since 1995 indicates that imports cannot be seen as a cause of injury, Eurofer claimed.

Eurofer concluded by saying that the high tariffs imposed by the US on most imports will effectively close to a large extent the US market to their most reliable suppliers, and risk significantly disrupting international trade flows. In the view of the European steel industry, measures by the European Commission are now necessary to shield the European steel market from the consequences of this unwarranted action of the US administration, it said.

Akira Chihaya, the Chairman of the Japan Iron and Steel Federation also thought that the decision was an unfair one, shifting the burden of the problems being experienced by the US steel industry to foreign steel imports, thus forcing foreign steel producers and domestic steel-users to endure unwanted, painful sacrifices to rescue the US steel industry from its own mistakes.

He claimed that some of the major causes of the deterioration in business operations in the US steel industry are: the expansion of equipment and facilities by US mills beyond the growth of domestic demand, price competition among integrated mills and between integrated mills and mini-mills, the decline in demand for automobiles, and excessive ‘legacy costs’ with which US mills are burdened.

‘These problems are primarily ones created by the US steel industry itself, and it is in complete disregard of this fact that the President’s decision seeks to attribute all these problems to foreign steel imports. This a serious mistake,’ he said.

Furthermore, he added, steel imports into the US peaked in 1998, and have since decreased by a sizeable 30% (42 million tons in 1998, 30 million tons in 2001). The US domestic steel market has begun to recover with US mills achieving improved operating rates, some near capacity (about 90%).

‘At this juncture, there is no reasonable ground whatsoever to justify the imposition of restrictions on steel imports. Import restrictions have been intended as a supplementary means of providing US industries with a temporary grace period for taking action on their own to regain their competitive strength. In other words, the restriction presupposes good faith efforts by the US steel industry to implement effective restructuring programs. At this moment, however, no realistic restructuring plans have been put forward by the US steel industry. In these circumstances, it is unfair that unilateral import restrictions have been decided for the protection of domestic industries,’ he said.

Chihaya said that he would look closely at the details of the President’s decision and consult with the Japanese Government, with a view to taking appropriate measures, including bringing the case before the WTO.

UK Corus Chief Executive Tony Pedder isn’t a happy camper either. He has called on the UK and Dutch governments, as well as the European Commission, to take immediate decisive action to respond with equal measures to protect and safeguard the EU steel industry. He has stated that the compelling logic is for the EU to introduce the same level of tariffs effective from the same date.

He commented: ‘EU and government officials have had several months to prepare their responses since the US announced its intentions. They should not hide behind procedural niceties or technicalities. The EU steel industry and its workforce need action now’.