USTR - Reigning Champions of Free Trade
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Reigning Champions of Free Trade
Robert Zoellick insists that the US was within its rights to impose tariffs on steel. 03/13/2002

Financial Times
(London)
Comment & Analysis

President George W. Bush acted last week to help the US steel industry regain its footing in accordance with World Trade Organisation rules. We have explained since last June that the problems of the global steel industry - overcapacity traced to a long history of government subsidies, market controls and protections - called for multilateral action, not finger-pointing. In that same spirit, I should like to share the Bush administration's views on this issue.

First, we should put this action in perspective. The US imports well over Dollars 1,000bn (Pounds 700bn) a year in goods from around the world, of which all steel products account for roughly 1 per cent. Last year the US ran a Dollars 427bn trade deficit. It is not unreasonable in these circumstances to use the domestic and international tools available to help a US industry cope with an influx of imports that has contributed to massive bankruptcies and loss of jobs.

Some of our trading partners have expressed concern that this heralds a protectionist turn in US policy. They are wrong. Within only a year, this administration has forged strong free trade credentials. From the launching of new global trade negotiations in Doha, to ending the impasse blocking China and Taiwan's entry into the WTO, to completing trade agreements with Jordan and Vietnam, to pushing ahead with negotiations to form the Free Trade Area of the Americas, the world's biggest open market, Mr Bush has time and again demonstrated his commitment to open trade. And he is determined to extend the benefits of open markets to the world's poorer nations by seeking to expand preferential access to US markets and exploring free trade agreements with countries in Africa, Central America and the Asia-Pacific.

Each of these stepping stones will ultimately lead to a trading system that creates sustainable prosperity for America, our main trading partners and the world's developing nations.

As for the decision itself, the US has long been the market of first and last resort for steel, as evidenced by our status as a leading steel importer. That fact, together with the drop in demand in Asia for steel as a result of the meltdown of Asian economies in the late 1990s, plus a continuing strong dollar that fuels export-led growth globally, has conspired to bring an unprecedented flood of imports into US markets.

WTO rules allow for safeguard measures precisely to enable countries to cope with such disruptions. Today about 30 per cent of US steel-making capacity has filed for bankruptcy. Domestic steel prices in the last quarter of 2001 were at their lowest for 20 years and nearly all US steel operations, regardless of efficiency or business model, were spilling red ink. Since 1997, 45,000 US steelworkers have lost their jobs.

To try to tackle these problems comprehensively, Mr

Bush launched multilateral talks last June to press the fragmented global industry to close down inefficient capacity. The talks were also aimed at tackling rampant market distortions, traced to a long history of national planning for "Commanding Heights" industries.

The president also made clear that we would not just wring our hands while diplomats met in drawing rooms: he asked the International Trade Commission, an independent agency, to investigate the effects of imports on the US's steel industry and its workers. In response to the ITC's unanimous finding that imports were a substantial cause of serious injury to the US steel industry, the Bush administration imposed the carefully constructed "safeguard" measure to give the industry adequate breathing space while minimising the impact on steel consumers.

The US action on steel is temporary. Tariffs will be phased out over a three-year period, during which time US steel-makers are expected further to restructure, reduce excess capacity and increase productivity - a process that the US government will monitor closely. We hope that steel companies worldwide will follow that lead to produce a healthier, freer international steel market.

Beyond the short-term nature of the relief, the administration has taken steps to minimise the impact of steel safeguards on our trading partners. For example, we exempted countries that have committed to the highest level of reciprocal market access - our North American Free Trade Agreement and FTA partners. The safeguard includes generous quotas for the crucial steel products of Russia and Brazil. There are important exclusions for other nations, including Australia and South Korea. Most developing countries will continue to enjoy open access to the US market. All these measures are consistent with WTO rules and represent the US effort to lessen any disruptions the temporary safeguards may cause.

It is important to note that the European Union and other nations - including Japan, South Korea, Brazil and India - have imposed safeguard provisions in the past for a wide range of products. Indeed, there are about 20 safeguard actions in place around the world. In addition, we are aware of the informal and formal arrangements other nations have used to divert the global steel problem to our shores.

We hope our trading partners respond to our safeguard action in the same rules-based, multilateral fashion that we have employed rather than by pursuing unilateral acts of retaliation. If others can demonstrate substantial injury and perceive the need to institute steel safeguards, we hope the safeguard policies parallel our care and attention to poorer countries.

Mr Bush is pursuing a full agenda of trade openness bilaterally, regionally and globally. He has asked the Senate to pass Trade Promotion Authority promptly, which will send a powerful signal to our trading partners that the US is united in its commitment to free and open trade. The US economy appears poised for a recovery that will once again help other nations regain growth, including for steel industries. It is all the more important, therefore, that all nations work together to pursue trade agendas that will foster development, opportunity and the multilateral trading system.

The writer is US trade representative
 
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