Europa Press release | March 5, 2002
Brussels - The EU on Tuesday deplored President Bush's decision to severely restrict the US market to steel imports from the rest of the world. On hearing the news, EU Trade Commissioner Pascal Lamy said: "The US decision to go down the route of protectionism is a major setback for the world trading system. Imports are not the cause of US difficulties and the measures announced today will not only not provide a solution but aggravate matters. I fear today's short-sighted move will end any hope of finding an internationally agreed solution at the OECD to overcapacity problems faced by the world steel industry, and will not rein in global subsidies. The EU will of course launch an immediate complaint in Geneva against this clear violation of WTO rules and we will take whatever measures are necessary to safeguard our own market."
US measures
The measures announced Tuesday follow the approach recommended by the members of the US International Trade Commission on 10 December 2001. As the EU said at the time, these measures are contrary to WTO rules and fail to address the real problems of the US steel industry.
The US steel industry is already benefiting from numerous protective measures. Last year the value of US steel imports fell by more than 23 per cent and was well below the figures for 1995 and 1996. In contrast, European Union imports are at record levels, three times those of the early nineties. As recently as 1997, the EU was still a net steel exporter with over 12 million tonnes.
Whilst the EU recognises that important sectors of the US steel industry, including many of the large integrated producers, face real difficulties, the key problem is not one of imports but the enormous overhang of so-called "legacy costs" for US steel producers - health and pension obligations for laid off and retired workers. Unlike European firms, the US did not use the 1990s to complete the restructuring process started in the 1980s.
The search for a multilateral solution
The EU had consistently sought a multilateral solution to the problems faced by the world steel industry - problems caused by uneconomic capacity and government subsidies. The OECD set up a high level group on steel issues and its working groups are due to address these issues next week. In addition, Mr Lamy wrote to the US Trade Representative, Mr Zoellick, proposing the creation of a fund to aid US restructuring. This could have been funded by a small levy on all sales of steel in the US - irrespective of whether this steel was domestically produced or imported. President Prodi also wrote to President Bush in a last-ditch effort to persuade the US not to go down the protectionist road.
Instead of addressing the problem of legacy costs and working constructively towards a multilateral solution, the United States has chosen a route which will lead to continued excess capacity and government subsidies world wide; higher prices for US steel users; and another damaging WTO dispute. It is asking the rest of the world to meet the cost of its own industry's problems.
EU response
The US decision fails to meet the requirements of the WTO safeguards agreements on both procedural and substantive grounds. The US approach has already been condemned by the Appellate Body, most recently in the Korea line pipe case. The EU will immediately set the wheels in motion to launch a WTO panel. This requires a 60-day consultation period which if unsuccessful would automatically lead to the establishment of a panel.
The European steel industry is already in a very fragile state because of an increase in low priced imports. Today's announcement by the US President could mean a loss of exports to the US market of 4 million tonnes; and up to 16m tonnes of trade diversion. In light of this, the EU may be forced to take provisional measures as a matter of urgency to avoid serious consequences for our industry which could undermine the restructuring efforts of the EU steel industry over the last decade.
However, such action would not be designed to cut the current high levels of imports to the EU, but only prevent the negative effects of massive trade diversion caused by the American measures. Any EU safeguard action would, of course, only be undertaken in full conformity with WTO rules and could be introduced swiftly on a provisional basis.Europa Press release:
