President Bush Imposes Steel Import Tariffs

by Jason Gorringe, Tax-News.com, London

06 March 2002

The US administration last night announced that it would impose import tariffs on many steel products, heightening trade tensions with the EU. Although lower than the 40% tariffs demanded by the inefficient US steel industry, the tariffs will range from an average 25% on flat-rolled steel, which accounts for more than half the value of all steel imported into the US, and will be between 8% and 30% on other steel products. They will take effect on March 20th.

There are a number of exemptions from the new tariffs, including NAFTA partners Canada and Mexico and developing countries such as Argentina, Thailand and Turkey.

The EU, currently embroiled in a range of trade disputes with the US, is sure to retaliate and will challenge the legality of the tariffs before the World Trade Organisation. "Steps will have to be taken if the Americans impede our trade in steel," said Romano Prodi, president of the European Commission. Anthony Gooch, a spokesman for EU Trade Commissioner Pascal Lamy, said: "The closure of the US steel market would significantly destabilise our relationship. We have worked hard with the US in recent years to tread carefully through many potential minefields."

"Our measures would be designed to maintain our current level of imports," said Mr Gooch. "We would keep our market open but not allow it to be flooded."

UK leader Tony Blair warned George Bush in a letter last month that any tariffs would be bad not only for the world economy but also for US consumers who would be forced to pay more for steel products. But the issue is embarrassing for Mr Blair because of the 'Steelgate' affair, in which it turned out that a US company owned by Indian steel magnate, Lakshmi Mittal, was one of those lobbying Washington to impose the tariffs. Mr Blair, who had befriended Mr Mittal, last night faced hostile speeches in the Commons. Adam Price, the Plaid Cymru MP, said Mr Mittal had spent $600,000 (£422,000) lobbying in support of US tariffs. The MP demanded emergency measures to rescue the steel industry as Mr Mittal "hammers another nail into its coffin".

The tariffs will offer the US steel industry the most comprehensive trade protection in its history, exceeding the "voluntary" quotas negotiated with Europe and Japan in the mid-1980s. But many of them are on a declining scale, and need to be seen in the context of upcoming congressional elections.

There were negative reactions to the news from many steel-exporting countries. Digby Jones, director general of the UK's employers' organisation the CBI, warned that imposing tariffs in the US would put British jobs at risk and could lead to foreign steel firms selling products to countries other than America, including the UK.

"The US should be setting an example to the world about what free trade really means," he said. "It means global free trade, not American free trade."

Australian steel companies export $400m worth of steel to the US yearly, of which half is flat rolled steel. But leading company BHP Billiton says it has been preparing for the worst for several months, shifting some exports into markets other than the US. The company also has a mini-mill operation in Ohio, producing 750,000 tonnes of steel, which should benefit from the decision.

Company representative Mandy Frostick said: "BHP Steel is well placed to meet any challenges such as those presented by the US trade sanctions because it is one of the most efficient low cost producers in the world."

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