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EU steel safety frames collapse before WTO policy

G. Srinivasan

NEW DELHI, March 28

EVEN as the ink on the European Union summit declaration has barely dried in Barcelona, where the Spanish Prime Minister Mr Jose Maria Aznar said his highest priority was to inject more momentum into the two-year-old programme to turn the EU into the world's most competitive economy by the end of this decade, the 15-member EU demonstrated this commitment by shutting imports of steel into its unified market.

On March 27, the European Commission adopted safeguard measures on steel, just after 10 days of the EU summit when Spain currently holding the EU Presidency waxed eloquent to turn the EU into the most competitive economy.

The ostentatious objective for safeguard duty slapped by the EU is that following the US action to severely circumscribe steel imports of March 20, the EU measures are designed to prevent floods of steel imports being diverted into the EU. EU contends that the US imposed severe restrictions on steel from the rest of the world with import tariffs as high as 30 per cent. Given that this left the US as the only lingering sizeable steel market, it has led to a serious risk that the EU would be flooded by steel shut out of the US market. This is likely because the extent of possible trade diversion is estimated as high as 15 million tones per year, 56 per cent of EU current import levels. EU steel imports are already at record levels with imports in 2001 being estimated at 26.6 million tonnes, compared to 15.4 million tonnes in 1997, an overall increase of 74 per cent over the last four years.

The 15 steel products on which safeguard duty is being applied include non-alloy hot-rolled coils, non-alloy hot-rolled sheets and plates, non-alloy hot-rolled narrow strip, alloy hot-rolled flat products, cold-rolled sheets, electrical sheets, tin mill products, quarto plates, wild flats, non alloy merchant bars and light sections, alloy merchant bars and light sections, rebars, stainless steel wire, fittings and flanges (other than stainless steel). For each of the 15 individual products, quota limits would be calculated by taking the average import level for the last three years (1999-2001) and adding 10 per cent. The overall effect is to establish the total imports of these products to around the 2001-level.

The EU has made it amply clear that measures are being taken solely to limit trade diversion resulting from US protectionism and the commission is not proposing country-by-country quotas at the stage of provisional measures in order to minimise the effect of the intervention and allow markets to operate, within the fixed overall ceilings. It has been further made clear that the measures would be applied in a non-discriminatory way. But in accordance with the WTO rules, the EU would not apply them to imports from developing countries where such imports of a particular product do not exceed 3 per cent of the total EU imports of that product.

It is interesting to note that the commission has made it clear that "under no circumstances will the EU measures last a day longer than those of the Americans". The EU has contrasted its measure with that of the US safeguard measure, stating that while the US acted when its steel imports were down by 33 per cent since 1998, the EU measure is made when such imports have gone up by 18 per cent since 1998. Even in country exclusions, US measure provides favourable treatment for selected friends ("far from the equal treatment required by WTO), while the EU measure excludes all developing countries whose imports account for less than 3 per cent as WTO rules demand. While the US aim was to provide yet more protectionism for the struggling sectors of the US steel industry, the EU claims its measure is to avoid Europe from "becoming the destination for all the steel shut out of the US market''.

In a punch line, the EU has said that while its safeguard measure rules "complied scrupulously with the requirements", the US had lost four safeguard cases over the last two years in WTO.

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