Jun 30, 2023
Steel dispute: EU rejects US offer

Steel dispute: EU rejects US offer

The European Union has rejected an offer from the United States to settle the trade dispute over punitive tariffs on steel and aluminium. The EU’s reasoning is said to be that the US proposal is not WTO-compliant.

Two systems that do not fit together

The biggest problem seems to be, among other things, the lack of a CO2 allowance trading system in the United States and the fact that the EU has put all its eggs in the carbon border tax basket (CBAM) in order to protect its domestic steel industry, which is one of the biggest CO2 emitters in the world. While the US steel industry produces much cleaner by international standards and has relied much more on Electric Arc Furnace (EAF) and Direct Reduced Iron (DRI) technology than the European Union.

EU has no interest in reducing its own steel overcapacity

The US government also seems to have a greater interest in fighting overcapacity than officials in Brussels, who take their instructions from the steel-producing EU member states. With a production capacity of about 200 million tonnes of crude steel per year, the EU is one of the giants among the world’s steel producers.

Politics with the steel hammer

And steel is traditionally used in election campaigns in Germany, the largest EU member state, and has already been decisive in elections on more than one occasion. Recently, the trade union IG Metall and the works council of thyssenkrupp steel europe threatened the Federal Minister of Economics, Robert Habeck, of the Green Party, during a rally not only with a symbolic but a very real steel hammer if the thyssenkrupp group did not receive billions in state subsidies for its DRI plans.

October 2023 no longer far away

If the United States and the European Union have not found a solution to the steel and aluminium dispute by the end of October 2023, the previously lifted punitive tariffs will automatically come into force again on both sides and EU steel producers will lose their Section 232 Tariff Rate Quotas for imports into the US. Whether both sides will be able to agree on a sustainable steel club will probably only be decided in the last few metres. The US presidential elections in 2024 are likely to make an agreement even more difficult.

US Section 232 tariffs softened for India?

Has India really won a victory in the US Section 232 tariffs on steel and aluminium? As we still have to read news about an alleged success of India in the negotiations on the Indian punitive tariffs, this once again highlights the importance of taking a second look at such news.

We had already pointed this out last Tuesday: India must withdraw WTO cases against Section 232 and others

AISI remains silent on the matter

For example, while the American Iron and Steel Institute issued press releases on the same day for the tariff rate quotas for the European Union in 2021 and for Japan in 2022, AISI had already expressed great concern about the TRQ for the United Kingdom and demanded moderation from the US government. In the case of the agreement now supposedly reached with India, there is no press release or other statement on the part of the association. Strange, isn’t it?

No official indication of softening of Section 232

And there is no word from the White House or the US Department of Commerce either. Only at the Office of the United States Trade Representative are two important pieces of information available online.

First important information in the press release:

“These tariff cuts will restore and expand market opportunities for U.S. agricultural producers and manufacturers. The resolution also maintains the integrity of the U.S. Section 232 measures. This announcement comes as President Biden welcomed Prime Minister Narendra Modi to the United States for an Official State Visit.”

Source: Office of the United States Trade Representative, 22 June 2023

The second important source is the Exchange of Letters between the United States and India. And from this it quickly becomes clear that India got nothing except what they already had and gave up 8 punitive tariffs in return. On the plus side, 6 WTO cases that would probably never have been settled are to be dropped.

And on the subject of steel, the press release with quotations on the Major Resolution on Key Trade Issues with India does not even come up again.

US Department of Commerce had ruled out special treatment

At the beginning of June 2023, the US Department of Commerce had clearly announced via Reuters that India could not expect any special treatment with regard to the Section 232 tariffs. This announcement has been confirmed.

And it has been confirmed once again that the reader must exercise caution when trade magazines and so-called experts simply spout reports without having looked at the details. A second look is always worthwhile.