Safeguard measures and the US steel industry
The US president Bush signed a proclamation on March 5, 2002 imposing increased tariffs on imports of certain steel products being effective from March 20, 2002 under the name of safeguard measures in the form of duties upto 30%, covering a wide range of steel products and a tariff quota applied for slabs. These duties are applied regardless of origin, however one of the only two exceptions was the case for
Mexico and
Canada due to the NAFTA Agreement and the other was WTO member developing countries unless their individual imports did not exceed 3% of the total imports into the US and 9% all together, of the related product.
The Bush administration safeguards were initially designed to ease the troubles of the US steelmakers that had started going bankrupt one after the other. However, while limiting the imports into the country these safeguard measures at the same time began to leave the trouble of competing in the international steel markets on the
US steel consumers' shoulders, while preserving the aim of trying to protect US producers via duties and tariffs.
The
US steel consumers and many of the downstream industries are pushed to the edge where they have to decide between leaving the business or moving overseas, failing to stand the rising price levels and troubles experienced in material supplies as a result of these safeguard measures. Many
US steel consumers defend that the Bush administration should take problems of both ends into consideration and switch its approach accordingly, maybe even by encouraging steel producers to compete in the global market just as the steel consumers have been doing, instead of depending on protections that currently exist.
There are still some who believe that without the safeguards the low cost imports would cause the end of
US steel industry and thereafter the import prices would start to increase once the US becomes entirely dependent on foreign steel. The US should increase exports in order to defeat the rising trade deficit but at first stage this does not seem so easy with the existing trade barriers of the
trading partner nations.
Taking that opportunity the US producers have been in an attempt to restructure and become stronger and more competitive through consolidations and acquisitions. In the last couple of weeks
US Steel announced its takeover of National Steel and International Group gave its bid for Bethlehem Steel. Previously, W.L. Ross&Co. purchased the liquidated assets of LTV Corporation. These are all important signs of steps taken towards a consolidation in the
US steel industry. Further mergers are also expected in the coming years.
On the other hand, while the safeguard measures were serving as a barrier to keep the low cost imports away from the country until the balances are back in place, the price recovery has turned out to be at higher than expected levels with the contribution of speculations as well. Especially after the tariff quotas imposed in
China and the EU, this situation has given other companies the opportunity to divert their exports into the US, as they found themselves able to compete in the US market again.
The good market conditions that lasted until the end of August changed direction in the last quarter of 2002 and with the increasing stock levels and the fear of the local market could go even further down, the US mills started to export their flat rolled products mainly to
China due to the extreme rise of demand and price levels in that market.
In the past, the start of US exports had literally been the end of stable prices in international markets back in 1995, and triggered the downfall of cold rolled prices by 20% within a week. Today, it seems that the future developments are very much dependent on the Chinese market demand which is currently showing incredible demand.
Under such circumstances, the US producers worry that once
China walks out of the market causing a sharp decline of demand the imports might again revert to their country. With such concerns, certain groups desire that the developing countries also become included in the safeguard measures in order to avoid future problems. Yet, the industry experts do not see much possibility in such decision as same would be in contradiction with the WTO requirements.