Economy

India seeks talks with EU at WTO on proposal to extend safeguard barriers on steel imports

Amiti Sen New Delhi | Updated on June 17, 2021

EU must explain why the proposed three-year extension is necessary

India has sought consultations with the EU this week at the WTO on its proposal to extend safeguard measures on import of steel products beyond June 30 that could to act as a barrier for Indian steel exports to the bloc for the next three years.

The proposed measure, which consists of a tariff-rate quota available per product category beyond which an additional import duty of 25 per cent will be applied, is likely to adversely affect Indian exporters as India is not among the exempted countries.

“As a member having substantial trade interest in the export of products concerned, India hereby requests consultations with the EU...with a view to review the information provided under Article 12.2 (related to injury suffered by the industry etc.), exchange views on the measure and reach an understanding on ways to achieve the objective set out in Article 8.1 of the Agreement (extension of equivalent concession to exporting country affected by measure),” according to a submission made by India at the WTO on Wednesday .

India proposed that the consultations should take place on June 18 at a mutually convenient time.

The European Commission had introduced steel safeguards on 26 product categories in July 2018, consisting of tariff-rate quotas (TRQs) above which a duty of 25 per cent would apply, till June 30, 2021. This was in response to a decision taken by the US government the previous year to impose additional tariffs on steel imports unilaterally on a large number of countries, including the EU and India. The EU said the US move would cause a diversion of trade flows into the bloc and it, therefore, needed safeguards to protect its industry.

The EU’s decision to extend the safeguard measures from July 1, 2021 to June 30, 2024 is bad news for Indian steel producers as the EU market is presently very lucrative due to rising prices. According to industry reports, India may exceed the TRQ allowance, disbursed quarterly, for certain steel products (determined quarterly) as there is a good demand in the EU for it. Exceeding the TRQ will result in the additional safeguard duties kicking in, making the items uncompetitive.

Steel exports

Steel exports from India peaked in 2020-21 to about 10.78 million tonnes, growing by 29.1 per cent (year-on-year) as domestic demand slowed down due to the Covid-19 disruptions. Exports to EU members, especially Italy, Belgium and Spain, showed high growth especially in the last quarter of 2020-21.

“Indian steel producers were hopeful that the safeguard measures imposed by EU on steel products would be allowed to lapse on June 30 as there is a strong demand in EU countries. It is surprising that the EU wants to extend the measure by another three years. India should sort the issue out positively to the industry’s advantage in the consultations,” a source following the development told BusinessLine.

The safeguard measures announced by the EU will be applicable on all exporting countries except some developing nations whose share in the bloc’s total import is negligible. India, being a major exporter of steel items to the EU, does not feature in the exempted list.

In case EU’s decision to extend the safeguard measures result in losses for Indian exporters of steel, the bloc must “pay” adequate compensation, as per WTO rules. To do so, any adequate means of trade compensation may be agreed through consultation. If such an agreement can’t be arrived at within 30 days, the affected exporting members individually may suspend substantially equivalent concessions and other obligations.

Published on June 17, 2021

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