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US steel tariffs worry Indian majors

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KOLKATA, March 6

FACED with intense pressure from the domestic steel industry, the US Government imposed steep import tariffs of up to 30 per cent on a range of steel products on Tuesday. The move is threatening to unleash a trade war between major steel producing and trading countries in the European Union and Asia.

The US Government has defended the move, a three-year `safeguard' action, as legal under the regulations of the World Trade Organisation (WTO), throwing back the blame, in turn, on Governments that subsidise steel production.

The newly-imposed duties cover 10 different steel products and range from 8 to 30 per cent. They will come into effect March 20 and cover flat-rolled steel and other steel imports from countries such as Brazil, South Korea, Japan, Taiwan, Russia, Germany, Turkey, France, China, Australia and the Netherlands.

The tariffs are to be progressively brought down over the next three years.

The imposition of 30 per cent tariff on steel imports has evoked the expected reactions from Indian steel majors.

Mr Arvind Pande, Chairman, Steel Authority of India Ltd (SAIL), fears that more markets would raise tariff walls in retaliation. "Global trading of steel will be a thing of the past,'' he said in a brief reaction to the US announcement. "It is most unfortunate that President Mr Bush has imposed safeguard duties on imports of steel into the US, effectively shutting out arrivals of all foreign steel with a few exceptions.... Steel exports from India will no doubt be a casualty," he said.

Mr B. Muthuraman, Chairman, Tata Steel, said that "administered interference" was a bane of the world steel industry, but the end result of the US imposition would be that component imports to the US would increase.

In terms of WTO provisions, Indian steel was hoping to be excluded from the action taken by the US, on the grounds of developing-nation status. "But this has not been agreed to by the US Government despite bringing this aspect to its notice," the SAIL Chairman observed.

Domestic steel manufacturers are still a trifle unsure whether India is also being targeted by the imposition of 30 per cent tariffs (marking an over 200-per cent increase over the existing rates) on most types of steel imported into the US from Europe, Asia and South America. But they agree that steel exports to the US will be stopped for three more years. Turkey is one of the countries exempted.

The steel-user industry in the US has already begun complaining that Mr Bush had done more harm than good to the American economy by the tariff measure. The Emergency Committee for American Trade, a group representing companies that buy steel, said that the 30 per cent tariff would force American manufacturers to move steel-intensive production overseas, close US plants and outsource US parts and components.

Mr Muthuraman said that for the Indian steel industry, it was finally a question of who was in a better position to tackle the situation in a domestic market ridden by overcapacity that was driving down prices.

He said that Tata Steel, which was among the world's three lowest-cost steel producers, would continue to export around 15 per cent of its production to alternative markets.

"We have developed China and the West Asian markets and exports this fiscal would be around half-a-million tonnes.'' There was further scope for cost-cutting, he observed.

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