Implications of Section 201: Pros and cons

Implications of Section 201: Pros and cons

There is so much anger in the steel industry after the section 201 announcements, that U.S. Treasury Secretary, Paul O'Neill was in Europe in the second week of April, trying to fan the fires, assuring the EU bloc that in most cases, exemptions are likely to be granted. No signs U.S. backing down on tariffs Meanwhile, officials from the EU, Japan and China, claim that during the two-day talks at the World Trade Organization (WTO), there was no sign from U.S. officials that they would recall the tariffs. Comments from EU officials indicate the possibility of setting up a WTO disputes panel by mid-May, if there is no change in the U.S. position. The U.S. defense for tariff application is that there is an oversupply of steel worldwide so there is a global responsibility to decrease it. O'Neill maintains his stance that a large portion of the tariff burden can be avoided by firms seeking thousands of exemptions under U.S. rules that allow imports if there is no other source of a particular product. The deadline for submitting requests for exemptions from Section 201 is May 20. While the U.S. trade representative's department has until July 3 to make decisions on the submissions. So far, more than 1,000 exemptions have been made. U.S. trade officials are defending their stance in the media by reiterating that the nations complaining the loudest about steel tariffs are the ones who have put up their own trade barriers which trade officials claim have cost U.S. exporters lost sales. Officials cite the EU, Japan, Brazil and China as offenders. Meanwhile, indicating that the 2002 National Trade Estimate Report on Foreign Trade Barriers cites a number of examples of foreign trade barriers for the U.S. US claims foreign trade barriers impediment Sources report that U.S. officials are specifically upset about barriers that curb exports to Japan, Canadian lumber policies and Canada's policy on wheat exports. These make up two of the three largest trading partners for the U.S. - with Canada taking the lead, followed by Mexico and then Japan. Trade officials in the U.S.also mentioned examples listed in the report of how foreign governments unfairly support their own steel producers at U.S. expense. Officials say Bush will use the data to push for freer trade worldwide and in the U.S. Foreign trade barriers list What seems to specifically trouble U.S. trade officials, sources report, is what they call an expansion of “non-tariff barriers” which officials claim stifle foreign competition and create disadvantages for exporting nations in terms of government regulations. Some examples given include:  Restrictions on foreign competition by the Canadian Wheat Board and Mexico's telephone company, Telefonos de Mexico (Telmex).  The EU's 10-year ban on U.S. beef imports produced with artificial growth hormones.  South Africa's and Ukraine's restrictions on U.S. poultry imports for alleged safety concerns.  Japanese quarantine restrictions on apple imports due to worries the bacterial disease, fire blight.  Other Japanese agricultural import barriers.  Regulations stifling competition in Japan's $130-billion Telecommunications markets. 201: Legal arguments and ramifications The U.S. defended its pro-tariff argument to the media in April, by reminding the public that certain foreign governments unfairly support their own steel producers at U.S. expense. Many nations tend to view the U.S. as becoming what they term “more protectionist.” In the face of this accusation, the U.S. criticized the EU, Japan, Brazil and China for their own barriers to U.S. imports which they explain, violate free trade. The reasoning behind lodging complaints with the WTO is the belief of many, that the U.S. industry's steel problems are not the result of rising imports - rather they were caused by what many have dubbed as an “unstructured, inefficient” industry that is perceived to have been protected behind what insiders have deemed a “barrier” of no less than 200 anti-dumping, anti-subsidy and safeguard measures. Experts say, of those, 57 were already implemented on EU exports over the past several years. Most analysts concur that the EU's request may lead to a disputes settlement procedure that could last through mid-2003 to 2005. Pascal Lamy has claimed in widespread media reports that there is only one goal behind the EU measures, to prevent a flood of diverted steel from arriving into the EU market. The reasoning behind this, he claims is that the U.S. move left the EU as the one remaining sizeable steel market and he claims that created a serious risk that its 15 nations would be flooded by steel shut out of the U.S. market. Lamy makes a distinction between the EU's quotas and U.S. quotas since he claims that the EU quotas would only begin once a product's imports reach more than 10% of the average of the last three years. In addition, EU tariffs are limited to a 200-day period and will only apply when steel imports exceed 2001 levels. At the same time, Lamy has accused the U.S. of “indulging in protectionism” that would cause it to in effect, shut down its market to imports from the rest of the world. Lamy remarked that the EU goal is to keep the market open to the rest of the world. That may be so, but now many countries are up in arms about the EU quotas with some in the media, branding the situation, on the brink of a “trade war.” What is happening, steel insiders reveal is that a chain reaction has taken place globally regarding steel quotas. If what is now happening, continues, many analysts fear that a chain of protectionism would damage the global system of free trade. That chain reaction includes a wide range of countries and the actions they took, following the Bush adminstration's 201 tariff declarations. America's closest neighbor, Canada, put its steel industry to the test when steelmakers called for an investigation and safeguard measures; Malyasia imposed tariffs of 50% on 199 products in March. The result? The EU then called for tariffs of between 14.9 -26% on 15 categories of steel products whose imports into the EU exceed a specified amount. The European Confederation of Iron and Steel Industries (EUROFER), lauded the EU move, saying it was high time that European steel producers look out for themselves. Lamy makes a distinction between the EU's quotas and U.S. quotas since he claims that the EU quotas would only begin once a product's imports reach more than 10% of the average of the last three years. In addition, EU tariffs are limited to a 200-day period and will only apply when steel imports exceed 2001 levels. At the same time, Lamy has accused the U.S. of “indulging in protectionism” that would cause it to in effect, shut down its market to imports from the rest of the world. Lamy remarked that the EU goal is to keep the market open to the rest of the world.