EU demands action versus 232 tariffs at trilateral meeting

The prospect of a grand bargain between the European Union, the United States and Japan involving action to reduce steel and aluminium overproduction while abiding by global trading laws has been raised.

An unusual meeting in Brussels on Saturday March 10 between EU Trade Commissioner Cecilia Malmström, US Trade Representative Robert Lighthizer and Japanese Minister of Economy, Trade and Industry Hiroshige Seko debated such a plan and agreed to continue discussions.

The goal, for the EU and Japan, is to see an end to the 25% import duty on steel and 10% on aluminium imposed under the Section 232 tariffs, to which only Mexico and Canada have been exempted thus far, although President Donald Trump has expressed his willingness to also exempt Australia.

The joint communiqué issued following the meeting did not name the key problem behind overproduction and low prices in steel and aluminium - namely Chinese output and exports - but it signaled a determination to find a World Trade Organization (WTO)-compatible way of dealing with it. The three “confirmed their shared objective 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, including where existing rules are not effective.”

This could address the problems caused by the difficulty of launching WTO-compatible trade protection measures against exports from one country, whose manufacturers have taken advantage of buying cut-priced or subsidized materials from another country to lower the price of their manufactured goods.

WTO-authorized countervailing or anti-dumping duties are designed to erect barriers against subsidies or cheap sales of overproduced goods, looking only at the commercial and government activities within the direct exporting country. They are not designed to look at whether the imports into an exporting country have had an artificially low price. The result is that global market prices can fall below profitable levels for metal producers that are not involved in these trades - and final importing countries can only use temporary safeguard duties for their producers: a blunt instrument that usually must be imposed on all imports of a product.

As a result, the trio agreed to take actions to develop stronger rules on industrial subsidies “to tackle the issues of market distortion or overcapacity.” They agreed to enforce existing rules “by working jointly on current and new disputes in the WTO” and to strengthen them, notably by improving WTO monitoring of industrial and trade policies that can damage global markets so that countries suffering from them can take prompter defensive measures. They agreed to work with an International Working Group on Export Credits to develop new guidelines limiting these price-depressing subsidies.

Malmström told Lighthizer after the meeting that the EU and Japan, as “longstanding security partners of the US,” should be exempt from the punitive tariffs, which are based on the assumption that the EU, Japan and other metal exporters might deny supplies to the US that is needed for defense, construction and manufacturing. But she tweeted afterward that despite the “frank discussion” there was “no immediate clarity on the exact US procedure for exemption... so discussions will continue.”

Keith Nuthall, International News Services Ltd (UK) - London, contributed to this article.

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