Union fears steel war ‘time bomb’

Date: 21/01/1999

By Chris Johnstone

THE EU and US have postponed rather than prevented a global trade war over steel, with manufacturers on both sides of the Atlantic expected to step up the pressure for protectionist barriers to stem imports.

Washington's new year package of measures to discourage a flood of imports has kept its domestic market open for the time being, but EU officials say that it includes a number of “time bombs” which could help bring a halt to global trade in steel.

Following the Asian crisis, the EU and US are the only major world markets which are still importing steel. However, each side has bitterly accused the other of not doing enough to take up the slack of redirected exports, prompting fears that both could be forced to impose bilateral barriers as part of a general retreat from free trade.

The measures unveiled by the US at the start of this month include tax breaks for loss-making local steel companies, hints of an agreement with Tokyo under which Japan would promise not to target the American market, and a green light for US producers to file anti-dumping complaints and call for safeguard measures against foreign imports.

Safeguard measures, unlike their anti-dumping equivalent, have a sledgehammer effect. They are not targeted at particular companies, but are aimed instead at protecting a whole sector. The only proof required for them to take effect is evidence that the industry is suffering because of imports.

American steelmakers are unlikely to need any encouragement to add to an existing caseload of complaints which already poses a threat to transatlantic trade. “There could be cases two or three months down the line which could restrict our exports,” said one EU official. “We fear that if there are safeguard clauses, we will automatically be affected.”

Two cases in the pipeline are already anticipated with anxiety in Europe. The US administration is examining safeguard measures to protect its wire-rod manufacturers following a complaint lodged on 30 December, and it is expected to impose anti-dumping measures on Russia, Japan and Brazil on 12 February.

EU officials have expressed concern about Washington's decision to speed up the latter case and its warnings that anti-dumping penalties could be backdated.

Protectionist pressure in the US will almost certainly prevent the World Trade Organisation's review of existing trade barriers from bearing any fruit in the autumn. The 'sunset review' calls for governments to re-examine all trade barriers which have been in place for more than five years.

Europe's main lobby group for steel manufacturers, Eurofer, is relieved that its members have not been prevented from exporting to the US, a market which accounts for between 25&percent; and 30&percent; of their foreign sales. However, while praising free trade, the organisation is set to demand fresh measures to protect its members from 'unfair' competition.

Eurofer is piecing together evidence to file anti-dumping complaints against imports of wire rod and cold-rolled flat steel. The group's director Christian Mari says the complaints will target countries responsible for 85&percent; of the increase in sales of both products on EU markets over the last year.

Wire rod has many uses, varying from fencing to the insides of vehicle tyres.

Cold-rolled flat steel is used for car bodies and white goods such as freezers and washing machines.

Eurofer has already spurred the European Commission to investigate allegations of dumping against six countries (Bulgaria, India, Iran, South Africa, Taiwan and Yugoslavia), citing a 200&percent; increase in exports of hot-rolled coils during 1998 fuelled by import prices 67&percent; lower in the EU than on their home markets.

Mari said the fresh anti-dumping complaints would target a similar mix of countries to those which have already been singled out.

The EU turned into a net importer of steel last year, as imports in the first nine months of the year rose by 5.3 million tonnes, or around 50&percent;. At the same time, European exports fell by 2 million tonnes.