| Author (Person) | Bower, Helen | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Publisher | ProQuest Information and Learning | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series Title | In Focus | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series Details | 7.3.02 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Publication Date | 07/03/2002 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Content Type | News, Overview, Topic Guide | In Focus | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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While the 'war on terrorism' has led to increasing co-operation between the European Union and the United States since 11 September 2001 a new 'war on trade' is brewing following President Bush's decision on 5 March 2002 to impose tariffs on US steel imports, which threatens to seriously weaken the transatlantic relationship. Following President Bush's decision to impose 30% tariffs on steel imports Pascal Lamy, the EU Commissioner for Trade, said the EU deplored the decision and added,
The EU immediately filed complaints with the WTO and demanded compensation for the €2.5 billion it expects to lose per year as a result of the US tariffs. Background The potential for an EU-US trade war over steel became apparent in June 2001 soon after a resolution had been reached in another important trade issue between the two powers over bananas. On 8 June 2001 President Bush asked the US International Trade Commission to investigate whether restrictions on steel imports were needed to improve the fortunes of the failing US steel industry, after vociferous lobbying from the US steel industry. The industry has been suffering in recent years with a number of steel plant closures. US steelmakers blame the increase in the number of imports into their country for this crisis. Indeed, imports into the US did increase by 10 million tons to 41.5 million tons in 1998 following the 1997 Asian financial crisis but they fell again in 1999 to 35.7million and 38m tons in 2001. However these figures are still above the annual figures of 15m-30m tons registered early in the 1990s. The US steel industry claims that this increase in the number of imports has affected the price of steel in the US which in turn has sparked a series of bankruptcies in US steel companies. However there has been a general trend towards more exporting in the industry generally with estimates that about 40% of the 810m tons of steel made in 2001 traded across a national border, up from less than 25% in the 1970s. Critics worldwide claim that the US steel industry is suffering not because of imports but because it has not done enough to restructure itself and to face the challenges of the late 1990s. A European industry analyst argues that,
In Europe several steel companies have been forced to restructure in order to remain competitive. Arbed of Luxembourg and Usinor of France sought to merge in 2001 and UK-based Corus - the result of a 1999 combination of British Steel and Hoogovens of the Netherlands - announced in February 2001 that it would cut its UK steelmaking capacity by 20%, shedding some 10,000 jobs. Tariffs for protection With the US steel industry still shying away from such restructuring and figures showing that the industry had lost $1.4 billion in the first half of 2001, the US International Trade Commission put forward several recommendations on 7 December 2001. In essence, these suggested that President Bush should impose up to 40% tariffs on steel imports for up to four years allowing the steel industry time to restructure itself. In the light of the USITC's proposals President Bush announced on 5 March 2002 that 30% tariffs would be imposed on certain steel imports. Although the tariffs fall short of the USITC's proposals in that they are only 30% and will only apply for three years rather than the recommended four they have still provoked much reaction both in the United States and abroad. Estimates suggest that the measures will cost foreign steel producers more than $9 billion a year in lost revenues and the tariffs represent the most severe trade restrictions since the mid-1980s, when the US forced Europe and Japan to restrict steel exports to the US or face punishing quotas. Domestic Politics In the United States the measures have been welcomed by the US steel industry. The American Iron and Steel Institute 'applauded the courageous decision in the national interest' by President Bush and said,
Many believe that President Bush really had no choice but to impose the tariffs after promising to help the steel industry in his election campaign in 2001. Such promises are believed to have helped him win the election after winning two states Ohio and West Virginia, where the steel industry has a large presence. With elections in November 2002 for the House of Representatives and the next Presidential election in 2004 many see the steel issue as key in determining the fortunes of the Republicans and President Bush himself. However, while the steel industry has welcomed the tariffs other sectors in the United States have criticised the move. The International Herald Tribune reported that Alan Greenspan, the chairman of the Federal Reserve Board had complained to the Bush Administration over the steel tariffs saying that the United States had benefited 'more than anybody' from international free trade. Many in the United States also fear that US consumers will suffer from the effects of the tariffs as products using steel, including cars, may increase in price. International Politics Around the world there was also severe criticism of President's Bush's decision with all the key steel making countries lodging complaints at the World Trade Organisation. The European Union, in its response, highlighted the need to find a multilateral solution to the problems hitting the global steel industry. It cited the high level group of the OECD which had been set up to tackle steel issues and was due to report on them at the end of March 2002. It also noted the efforts it had made to avoid such tariffs. Pascal Lamy had suggested to Robert Zoellick that a fund should be created to aid US restructuring and Romano Prodi wrote to President Bush in a last ditch effort to persuade the US not to impose import tariffs. With all of this to no avail the EU is now facing a serious hardship for its own steel industry because of the US measures. Not only is it concerned about the loss to the industry caused by the decrease in exports to the US which it estimates could be up to 4 million tonnes, it also fears that 16 million tonnes of steel from elsewhere will find its way to the EU because it can't get into the US market. As the EU noted, the US is asking the rest of the world to meet the costs of its own industry's problems. Business organisations within the EU have also criticised the tariffs. Eurofer, the European Confederation of Iron and Steel industries, condemned the decision of President Bush saying,
UNICE, the pan-European employers organisation, joined Eurofer in its criticism of the tariffs. Its secretary general, Phillipe de Buck, said,
UNICE also highlighted the impact of the decision on EU-US trade relations saying,
The Future of EU-US Relations The EU will now have to see how the World Trade Organisations views the tariffs. While the Appellate Body has already condemned the US move, a bilateral consultation phase will be set up. If this does not reach agreement within 60 days then a WTO dispute panel will be convened with the prospect of panel negotiations lasting more than a year. If the EU were not to be supported by the WTO, although it is convinced it has a strong legal case, and if it does not receive compensation from the US, then it has already said it would be prepared to take retaliatory actions by blocking US goods. Clearly, the decision on steel import tariffs has added further strain to EU-US trade relations. There are already current disputes over a provision in US tax law which is in effect a subsidy for exports and another on Europe's ban on imports of beef treated with growth promoting hormones. While the two sides might be co-operating on the 'war on terrorism' they appear to be increasingly battling each other in the 'war on trade' Further information within European Sources Online:
Further information can be seen in these external links: EU Institutions
Miscellaneous Organisations
Further and subsequent information on the subject of this In Focus can be found by an 'Advanced Search' in European Sources Online by inserting 'steel' in the keyword field. Helen Bower A new trade war between the EU and US is brewing following President Bush's decision on 5 March 2002 to impose tariffs on US steel imports. |
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