State subsidy ban still an issue for developing countries

State subsidy ban still an issue for developing countries

Talks under the guidance of OECD over eliminating state subsidies worldwide have been ongoing since December 2002 when such a decision was taken by its members as a solution for the global overcapacity problem of steel and consequent poor market situation. All along the beginning of these talks, developing countries have held their argument stating that they should not be put in the same pot with developed countries in terms of economic conditions and thus have to be granted certain flexibility over state subsidies. Besides, there is a disproportion between developing and developed countries with respect to steel consumption per capita as a natural consequence of economic conditions. For instance, annual steel consumption per capita in the US and Japan are 400 kg and 600 kg respectively where as this amount is below almost 50 kg in developing countries. India, as being one of those developing countries, is demanding that state subsidies should be in effect until annual steel consumption per capita reaches to at least the world average from current 30 kg level. Moreover, India together with other developing countries expressed that any subsidy ban must not cover capacity expansions of steel companies as gradually growing steel demand in these countries needs to be met. Besides, small scale steel units, capacities of which are below average set by the World Trade Organization (WTO), should also be excluded from such a ban owing to the fact that these steel units hold a very important position in the steel industry. As recently reported by SteelOrbis, India is trying to form an informal group with Brazil, China and Egypt based on the common economic interest for the purpose to negotiate with developed countries, which find exemption demand of developing countries unfair, in the forthcoming talks. Furthermore, India states that it is ready to negotiate and participate in a steel subsidy ban agreement in case minimum requests are met. In line with the schedule, next negotiations are expected to take place on March 31- April 5, 2004 and May 6-11, 2004. 35 countries including the US, Canada, Japan, South Korea, Australia and Russia will partake in talks. According to the statement released by OECD, the draft agreement for limiting steel subsidies is to be submitted in May and the final agreement to take place by September latest.