FREE TRADE VS. PROTECTIONISM

Which Way for the US Steel Industry?

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Section 201Tariff Measures

In mid-2001, Bush asked the U.S. International Trade Commission (USITC) ⁴to find out whether the import of steel in to the US was harming the domestic steel producers. Following this, the USITC conducted an investigation and gave its report in late 2001. The USITC'S investigation found out that US steel industry was seriously injured because of low-priced steel imports. It reported that 16 out of 33 steel product categories were injured because of imports. The USITC recommended tariffs of up to 40% on imported steel.

In March 2002, the president imposed tariff measures to help domestic producers compete with imported steel. The tariffs would range from 8% to 30% on various imported steel products and would be applicable for 3 years. The measures included: 30% ad valorem duty to 8% ad valorem duty, 24% ad valorem duty to 7% ad valorem duty and 18% ad valorem duty to 6% ad valorem duty on import of finished rolled- steel products in the first, second and third year respectively; tariff rate quota on import of slabs: 5.4 million tons in first year, 5.9 million tons in second year and 6.4 million tons in third year. Over-quota duty rate would be 30%, 24% and 18% respectively.

These tariff and quota measures were not applicable to Canada, Mexico, Israel and Jordan, US's free trade partners. Most developing countries were also excluded from these measures provided their share of the total imports during 1996-97 was less than 3%. 1.1 million tons of specific hot-rolled steel per year and 127 flat-rolled products were exempted. The other measures announced to protect the domestic industry included: Creating an anti-surge monitoring mechanism to determine whether there is any rise in imports from a developing country which is undermining the effectiveness of the measures announced. In such circumstances, the measures announced would be modified to apply to the product from that country; Creating an import licensing system for steel products covered by a safeguard remedy. This would help in monitoring the import of such products.⁵ Under the US trade laws, the president could reduce, modify or terminate the safeguards if it was found that the industry has not made any efforts to be more competitive or if the changed economic situation has weakened the effective of the measures.

In August 2002, the government decided against imposing anti-dumping duties on cold-roll steel from 5 countries (Japan, Australia, India, Sweden and Thailand). This decision was based on the finding by the USITC that the import of cold-roll steel was not harming the domestic industry. Further, the government also announced to increase the number of steel products that were exempted from the tariffs imposed in March 2002 to 178.⁶ This decision came as a shock to the industry. Said Thomas J. Usher, chairman and CEO, US Steel Corp., "The result of this ruling is that American business, American steel and tens of thousands of workers will continue to be injured by illegal foreign trade." Added, Leo W. Gerard, president, USWA, "This decision shows a pattern in U.S trade policy that permits the root cause of unfair steel trade to persist, despite facts demonstrating that global excess steel continues to illegally flood our market." However, supporters of free trade and industries using steel hailed the decision saying that steel companies were already benefiting from higher prices because of the recently announced tariffs. According to analysts, most cold-rolled steel was already covered by Section 201 tariffs of up to 30%; this resulted in an increase in price of cold-roll steel 70 to 75%. An additional anti-dumping duty would stop the trade in cold-rolled steel.

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[4]An independent U.S. government agency.

[5]The American Steel Industry, Current Trade Issues.

[6]By March 2003,more than 1000 specialized steel products were exempted.

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