EU and US Trade Dispute Escalates over Steel Duty Reimbursement

The European Union has formed an unlikely alliance with several major economies to challenge a US law requiring the reimbursement of anti-dumping and countervailing duties to affected American companies. The EU and its partners argue that the law is an illegal response to dumping and subsidization, as it provides an additional anti-dumping and anti-subsidy remedy not allowed under the WTO Agreements. This dispute has the potential to destabilize the global steel market and create a vicious cycle of retaliation.

Key Takeaways:

• The EU, Australia, Brazil, Chile, India, Indonesia, Japan, South Korea, and Thailand have joined forces to challenge the US law on steel duty reimbursement.
• The European Commission has expressed concerns that the law will create an unhealthy vicious circle for the global steel market.
• The law, signed into effect by President Bill Clinton on October 28, requires the US Administration to reimburse affected American companies for anti-dumping and countervailing duties imposed on foreign producers.
• Commission officials argue that reimbursing companies is an illegal response to dumping and subsidization, as it provides an additional remedy not allowed under WTO Agreements.
• The distribution of duties to petitioners will create an incentive to bring more cases, leading to an increase in trade litigation against companies exporting to the US.
• Senator Robert Byrd, a key proponent of the Byrd Amendment, claims that the law is needed to help American industries, including steel producers, ranchers, and apple growers.
• The European and American markets have steadied since the import surges in 1998, with the EU's steel imports rising 50% and the US's imports increasing by 30%.

Statistics:

• The US Customs Service collected between USD40 million and several hundred million dollars in duties in 1997.
• The EU's steel imports rose from 13 million tons in 1997 to 19 million tons last year.
• US steel imports increased from 31 million tons in 1997 to 41.5 million tons in 1998.
• The EU imports ten times more steel from Japan than Europe, and twice as much from Russia.
• European production fell 3% in 1999, with a 1.6 million tonne positive trade balance in finished products, but an overall deficit of 1 million tons.
• Capacity in the EU steel market equals more than a quarter of world production, or at least 250 million tons.

Sources:

• European Report No 2540
• Eurostat statistical agency
• Eurofer, the European iron and steel lobby
• The London-based Iron and Steel Statistics Bureau