Push for deal on steel early warning plan

Date: 11/05/2000

By Peter Chapman

SUPPORTERS of an 'early warning system' to nip arguments over steel in the bud before they blow up into full-scale global trade wars are battling to win approval for the scheme at a key meeting of the Organisation for Economic Cooperation and Development later this month.

Industry sources say the move, backed by the European steel-makers lobby Eurofer and US industry groups, could be ratified at the 23 May meeting of the OECD's influential steel committee. "This proposal has been prepared on the basis of preliminary work by the US industry and ourselves and discussions with all the major steel industries of the world at the OECD last February," said Eurofer director Christian Mari, adding: "It shows that it is possible to work together."

The initiative has been inspired by the need to deal with scenarios such as the massive increase in trade tensions resulting from the meltdown in Asian economies during the late 1990s. But experts such as Mari claim the early warning system would also ease more predicable tensions caused by the regular peaks and troughs in the highly cyclical steel industry, such as the next downturn expected in 2002-2003.

Under the scheme, the OECD would play host to a special committee of national steel industry experts and industry representatives focusing on trade issues. This panel would examine data on market conditions and recommend a plan of action - such as a lowering of output - to flatten out damaging peaks and troughs in the steel business cycle.

OECD officials warn, however, that it is far from certain that the proposal will be agreed this month and say it could still be blocked by some of the 29-country organisation's more sceptical members. "There is a risk of that," said Franco Mannato, an economist with the OECD's steel committee, who added that the plan had "several problems" which could lead some member countries to demand further negotiations.

A key concern is the fear that the US could use the system to support the earlier introduction of measures such as quotas and duties. Washington, urged on by the powerful American steel lobby, is seen by many as the most aggressive pursuer of trade actions in cases involving the sector. "On a political level there are some who fear that the new system could give the US fuel for dealing with the next steel crises rather than solving them," said Mannato.

He added that some OECD members were also concerned that there would be a lack of reliable data on steel trade flows stemming from countries outside the organisation. A third factor could be a reluctance among steel industry associations within OECD states to contribute to the estimated €100,000-a-year cost of running the scheme.

Supporters of an 'early warning system' to nip arguments over steel in the bud before they blow up into full-scale global trade wars are battling to win approval for the scheme at a key meeting of the Organisation for Economic Cooperation and Development in May 2000.