of the United States Trade Representative
|Reigning Champions of Free Trade
|Robert Zoellick insists that the US was within its rights to impose tariffs on steel.
Financial Times (London)
Comment & Analysis
President George W. Bush acted last week to help the US steel industry regain
its footing in accordance with World Trade Organisation rules. We have explained
since last June that the problems of the global steel industry - overcapacity
traced to a long history of government subsidies, market controls and
protections - called for multilateral action, not finger-pointing. In that same
spirit, I should like to share the Bush administration's views on this issue.
First, we should put this action in perspective. The
US imports well over Dollars 1,000bn (Pounds 700bn) a year in goods from around
the world, of which all steel products account for roughly 1 per cent. Last year
the US ran a Dollars 427bn trade deficit. It is not unreasonable in these
circumstances to use the domestic and international tools available to help a US
industry cope with an influx of imports that has contributed to massive
bankruptcies and loss of jobs.
Some of our trading
partners have expressed concern that this heralds a protectionist turn in US
policy. They are wrong. Within only a year, this administration has forged
strong free trade credentials. From the launching of new global trade
negotiations in Doha, to ending the impasse blocking China and Taiwan's entry
into the WTO, to completing trade agreements with Jordan and Vietnam, to pushing
ahead with negotiations to form the Free Trade Area of the Americas, the world's
biggest open market, Mr Bush has time and again demonstrated his commitment to
open trade. And he is determined to extend the benefits of open markets to the
world's poorer nations by seeking to expand preferential access to US markets
and exploring free trade agreements with countries in Africa, Central America
and the Asia-Pacific.
Each of these stepping stones
will ultimately lead to a trading system that creates sustainable prosperity for
America, our main trading partners and the world's developing nations.
As for the decision itself, the US has long been the
market of first and last resort for steel, as evidenced by our status as a
leading steel importer. That fact, together with the drop in demand in Asia for
steel as a result of the meltdown of Asian economies in the late 1990s, plus a
continuing strong dollar that fuels export-led growth globally, has conspired to
bring an unprecedented flood of imports into US markets.
WTO rules allow for safeguard measures precisely to enable countries to
cope with such disruptions. Today about 30 per cent of US steel-making capacity
has filed for bankruptcy. Domestic steel prices in the last quarter of 2001 were
at their lowest for 20 years and nearly all US steel operations, regardless of
efficiency or business model, were spilling red ink. Since 1997, 45,000 US
steelworkers have lost their jobs.
To try to tackle
these problems comprehensively, Mr
multilateral talks last June to press the fragmented global industry to close
down inefficient capacity. The talks were also aimed at tackling rampant market
distortions, traced to a long history of national planning for "Commanding
The president also made clear
that we would not just wring our hands while diplomats met in drawing rooms: he
asked the International Trade Commission, an independent agency, to investigate
the effects of imports on the US's steel industry and its workers. In response
to the ITC's unanimous finding that imports were a substantial cause of serious
injury to the US steel industry, the Bush administration imposed the carefully
constructed "safeguard" measure to give the industry adequate breathing space
while minimising the impact on steel consumers.
action on steel is temporary. Tariffs will be phased out over a three-year
period, during which time US steel-makers are expected further to restructure,
reduce excess capacity and increase productivity - a process that the US
government will monitor closely. We hope that steel companies worldwide will
follow that lead to produce a healthier, freer international steel market.
Beyond the short-term nature of the relief, the
administration has taken steps to minimise the impact of steel safeguards on our
trading partners. For example, we exempted countries that have committed to the
highest level of reciprocal market access - our North American Free Trade
Agreement and FTA partners. The safeguard includes generous quotas for the
crucial steel products of Russia and Brazil. There are important exclusions for
other nations, including Australia and South Korea. Most developing countries
will continue to enjoy open access to the US market. All these measures are
consistent with WTO rules and represent the US effort to lessen any disruptions
the temporary safeguards may cause.
It is important to
note that the European Union and other nations - including Japan, South Korea,
Brazil and India - have imposed safeguard provisions in the past for a wide
range of products. Indeed, there are about 20 safeguard actions in place around
the world. In addition, we are aware of the informal and formal arrangements
other nations have used to divert the global steel problem to our shores.
We hope our trading partners respond to our safeguard
action in the same rules-based, multilateral fashion that we have employed
rather than by pursuing unilateral acts of retaliation. If others can
demonstrate substantial injury and perceive the need to institute steel
safeguards, we hope the safeguard policies parallel our care and attention to
Mr Bush is pursuing a full agenda of
trade openness bilaterally, regionally and globally. He has asked the Senate to
pass Trade Promotion Authority promptly, which will send a powerful signal to
our trading partners that the US is united in its commitment to free and open
trade. The US economy appears poised for a recovery that will once again help
other nations regain growth, including for steel industries. It is all the more
important, therefore, that all nations work together to pursue trade agendas
that will foster development, opportunity and the multilateral trading system.
The writer is US trade representative