Steel Producers' Paris Meeting Fails To Agree Capacity Reductions

by Ulrika Lomas, Tax-News.com, Brussels

13 September 2002

A meeting of 39 steel producing countries in Paris this week, contemplating world-wide over-capacity and production chaos caused by the US protective tariffs imposed last March, has failed to come up with any measures to improve the situation other than to bleat one more time that nations with high-cost plants ought to close them down.

That description fits the US as well as anyone; indeed, Mr. Bush's tariffs were naively intended to give US steelmakers time to modernize, as well as being a badly disguised sop to Republican voters in densely populated areas of the country.

The tariffs have failed about as comprehensively as they could, acting to increase demand for over-priced US steel, infuriating trading partners, and even largely failing to stem imports as secondary US producers import more lower-value product to take advantage of higher prices. Seldom has there been a more graphic demonstration of the benefits of free trade - except that economically illiterate politicians don't speak that language!

"We live in a world that isn't always about living on a free-trade basis," says Grant Aldonas, undersecretary for international trade at the Commerce Department. "It's about moving the process in the right direction. And I truly believe that this action has done that." Let's try to understand that: we'll get more free trade by having less of it, right?

It's not just in the US that production is rising: Brazil produced 36% more steel in July than in July 2001, while production in Russia, the EU and Japan is up about 3% on last year.

Many delegates in Paris were critical of the US action. "Mr. Bush has been hypocritical," said D. Singh, joint secretary for India's ministry of steel. "It is difficult to explain or understand how one argues for free markets and have safeguards at the same time."

The administration hasn't even reaped the domestic political benefits that it expected from the tariffs: vociferous complaints from steel users in the US, plus threatened WTO action by trading partners, has led the administration to agree more than 700 exclusions from the tariffs, covering about 25% of the trade invlved, and these exclusions have angered the very workers Bush sought to placate.

United Steelworkers President Leo Gerard says the line he hears most from workers is: "Hey, I thought these guys were on our side. Many of our members even talk of betrayal."

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