Transcript Timeline of Steel Safeguard Saga

United States-Definitive Safeguard Measures on
Imports of Certain Steel Products
Presented by:
Dara Soun & Asha Tiwari
GMU – ITRN 603, Dr. Malawer
1
Uses of Steel
•
•
•
•
Aircrafts
Automobiles
Construction of homes and building materials
Transportation means
–
•
•
•
•
Bridges, railroad tracks, and Highway
Home and restaurant appliances
Cookware
Furniture
Toys and others
GMU – ITRN 603, Dr. Malawer
2
United States Steel Industry
• Nationwide:
–
–
–
95 producers
20 integrated mills
75 minimills
• Employees:
–
–
170,000 in 1997
140,000 in 2004
• Leading Domestic mills
–
Indiana, Pennsylvania, Michigan, Ohio, and Illinois
• Revenues
–
$51 billion in 2004
GMU – ITRN 603, Dr. Malawer
3
Steel Import Crises
•
•
•
•
•
•
•
All 95 domestic steel producers were in danger by1998
1998 – 2000 - highest steel import years in US history
Low-priced steel imports flooded the US domestic market
Steel prices had fallen to 20-year lows
Price dropped nearly 20%
Hot-rolled steel import surged 70%
Six steel companies went bankrupt regardless the booming
demand for steel in 1998 alone
• A total of 35 firms filed for bankruptcy between 1997-2001
GMU – ITRN 603, Dr. Malawer
4
Steel Import Crises
(Cont.)
• US steel producers lost customers to low-priced steel imports
–
–
Automobile, construction, and other industries looked for better profits
turned to steel suppliers with cheaper prices
• Several start-ups and steel companies undergoing
modernization efforts were particularly vulnerable
–
–
High fixed costs
Unavoidable operating losses
• Revenues on sales continued to drop resulted from:
• Lower and lower sales revenue
• Falling operating income
• Disappearing profits
GMU – ITRN 603, Dr. Malawer
5
US Steel Mills’ Responses to Influx
of Steel Imports
• Domestic steel mills sought legal actions
• Twelve integrated and mini steel producers joined with
USWA to file trade cases against Russia, Japan, and Brazil
– they violate of US trade laws
• By 1999, a total of sixty anti-dumping cases were filed.
GMU – ITRN 603, Dr. Malawer
6
U.S. Government’s Response to Influx
of Steel Imports
• In March 2002, the Bush Administration decided to
impose tariff on steel imports between 8 and 30
percent
• Tariff covered 29 percent of US steel imports by
volume
• Imported from Canada, Mexico, Israel, and Jordan
were excluded
• Developing countries with small share of supply less
than 3% of US market were also excluded
GMU – ITRN 603, Dr. Malawer
7
Tariff-rate Quota for Ten Steel
Categories
Product
First Year
Second Year
Third Year
Flat-rolled
30%
24%
18%
Tin mill
30%
24%
18%
Hot rolled bar
30%
24%
18%
C-F bar
30%
24%
18%
Rebar
15%
12%
9%
Welded tubular
15%
12%
9%
Fittings / flanges
13%
10%
7%
SS bar
15%
12%
9%
SS wire
18%
12%
9%
SS rod
8%
7%
6%
GMU – ITRN 603, Dr. Malawer
8
Effects of Tariffs on U.S. Steel
Industry
• Helped the industry get back on its feet
• Stabilized steel prices in the U.S.
• Allowed the industry to consolidate
• Stopped the flood of bankruptcies
• Eliminated layoffs of steel workers
• Encouraged a wave of productivity-enhancing
investment
GMU – ITRN 603, Dr. Malawer
9
PART II
Response from the
International Market: The
WTO Dispute
GMU – ITRN 603, Dr. Malawer
10
Who Are the Involved Parties?
Respondent:
• Complainants:
– European
Community
– Japan
– Korea
– China
– Norway
– Switzerland
– New Zealand
– Brazil
United States
V.S.
GMU – ITRN 603, Dr. Malawer
11
Timeline of Steel Safeguard Dispute
• Jun 2001:
President Bush asked the USITC to conduct a global safeguard investigation under Section 201
of the Trade Act of 1974, on 33 types of steel imports.
• Oct 2001:
The USITC found that steel imports were a substantial cause of serious injury to a
segment of the US steel industry.
• Dec 2001:
The USITC found that steel imports had caused serious injury to the US steel industry and
it provided remedy recommendation to President Bush – prohibitive
tariffs.
• Jan 2002:
US Trade Representative Robert Zoelick questioned USITC on steel imports from
Canada and Mexico.
• Mar 2002: President Bush ordered a 3-year steel tariff program for 10 categories of steel imports –
Canada and Mexico are excluded; additional exclusions were granted in summer of 2002.
•
•
•
•
Jun 2002: The WTO established a panel to hear the case of eight complainants
May 2002: The WTO panel ruled against the US safeguard remedies.
Aug 2003: The US appealed the panel’s decision to the WTO Appellate Body.
Sep 2003: The USITC issues two reports that evaluated the impact of the safeguard measures on steel
producers and steel users. Both parties claimed that the report justified their preferred position.
• Dec 2003:
President Bush lifted the tariff on steel imports 21 months after its enactment.
GMU – ITRN 603, Dr. Malawer
12
“Proclamation 7529”
• March 5, 2002 – Proclamation enacted
• Measures become effective for a period of 3
years and one day.
• 8%-30% tariff on imports of certain steel
products.
• Excluding imports from Canada, Israel, Jordan,
and Mexico.
GMU – ITRN 603, Dr. Malawer
13
United States’ Position
• US steelworkers wanted the tariffs to remain
–
–
Political risks, re-election
Support from “steel states”
• President Bush confronted a “test of wills”
–
–
Sovereign right as president
Balancing beneficiaries of tariff to those negatively effected.
GMU – ITRN 603, Dr. Malawer
14
The WTO Panel Rulings
• July 2003 Panel reports
–
–
Issued Eight reports in one document
Safeguard measures imposed by the US inconsistent with the Agreement on
Safeguards and GATT 1994
• Particular Findings:
–
The US failed:
• to provide a reasoned and adequate explanation of how the facts
supported its actions
• to provide a reasoned and adequate explanation that a ‘causal link’
existed
• to provide explanations for the same product bases.
• to comply with the requirement of ‘parallelism’ between the
products.
GMU – ITRN 603, Dr. Malawer
15
Agreements involved in the Case
GATT 1994
• Article I: Most-Favored-National Treatment
• Article II: Schedule of Concessions
• Article X: Publication and Administration of Trade
Regulations
• Article XIII: Non-discriminatory Administration of
Quantitative Restrictions
• Article XI: Emergency Action on Import of Particular Products
• As well as Article XVI of the WTO Agreement
GMU – ITRN 603, Dr. Malawer
16
Violation of Article XIX: GATT 1994
• GATT 1994:
– Article XIX: Emergency Action on Imports of Particular
Products
– 1. (a) If, as a result of unforeseen developments and of the
effect of the obligations incurred by a contracting party under
this Agreement, including tariff concessions, any product is being
imported into the territory of that contracting party in such
increased quantities and under such conditions as to cause or
threaten serious injury to domestic producers in that territory of
like or directly competitive products, the contracting party shall
be free, in respect of such product, and to the extent and for
such time as may be necessary to prevent or remedy such injury,
to suspend the obligation in whole or in part or to withdraw or
modify the concession.
GMU – ITRN 603, Dr. Malawer
17
Agreement on Safeguards
• Article 2: Conditions
–
A member may apply a safeguard measure to a product only if that
member has determined that such product is being imported into its
territory in such increased quantities absolute or relative to domestic
production.
• Article 3: Investigation
–
A member may apply a safeguard measure only following an investigation
by the competent authority of that member pursuant to procedures
established and made public in consonance with Article X of GATT 1994.
• Article 4: Determination of Serious Injury or Threat Thereof
–
–
–
Significant overall impairment in the position of a domestic industry
Clearly imminent
Determination shall be based on producers as a whole of the like or
directly competitive products
• Article 5: Application of Safeguard Measures
–
A member may apply safeguard measures only to the extent necessary to
prevent or remedy serious injury and to facilitate adjustment.
GMU – ITRN 603, Dr. Malawer
18
Agreement on Safeguards
(Cont.)
• Article 7: Duration and Review of Safeguard Measures
–
–
A member shall apply safeguards measures only for such a period of time as may
be necessary to prevent or remedy serious injury or facilitate adjustment.
Period shall not exceed four years.
• Article 8: Level of Concessions and Other Obligations
–
A member proposing to apply a safeguard measure or seeking an extension of a
safeguards measure shall endeavor to maintain a substantially equivalent level of
concessions and other obligations.
• Article 9: Developing Country Members
–
Safeguard measures shall not be applied against a product originating in a
developing country member as long as its share of imports of the products
concerned in the importing member does not exceed 3 per cent import share
collectively.
• Article 12: Notification and Consultation
–
Member shall immediately notify the Committee on Safeguards upon:
• Initiating an investigation process
• Making a finding of serious injury
• Taking a decision to apply or extend a safeguard measure
GMU – ITRN 603, Dr. Malawer
19
Safeguard Actions under US Law
Section 201, Trade Act of 1974
Global Safeguard Investigations, Import Relief for Domestic
Industries
– Import relief based on article XIX of the GATT, as further
defined in the WTO Agreement on Safeguards.
– Article XIX of the GATT “the escape clause”
– Section 201 provides the legal framework under U.S. law
for the President to invoke U.S. rights under article XIX.
GMU – ITRN 603, Dr. Malawer
20
The Appellate Body’s Ruling
• Nov 10, 2003 – Ask US to comply!
• The United States to bring safeguard measures
which are inconsistent with the Agreement on
Safeguards and the GATT 1994 into conformity with
its obligations under those Agreements.
• 2003- Bush lifts tariff after around 20 months of
enactment.
GMU – ITRN 603, Dr. Malawer
21
European Union’s Retaliatory
Plan
• A $2.2 billion in retaliatory
sanctions will be used If the
safeguard measures are not
lifted immediately
–
Expected date was 15 December
2003
• EU countries were planning to
impose punitive tariffs on:
–
–
–
–
US citrus fruit (Florida effected)
US textile products
Motorcycles
Other US goods
GMU – ITRN 603, Dr. Malawer
22
Recommendations
• United States IS a WTO Member,
needs to comply with international
agreements!
• Tariffs can positively and
negatively effect domestic steel
industry:
–
–
(+) Increase domestic sales, increase
employment steel producing
(-) Drives prices up of steel for small
manufactures, decrease employment in
steel using industries (auto
manufacturers)
GMU – ITRN 603, Dr. Malawer
23