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Regulating state subsidies for steel - an impossible dream?
September 2002
The recent working group meeting in Paris on steelmaking overcapacity and market discipline ended without agreement on proposals tabled by the US delegation. This is not surprising. The idea that an effective global accord could be reached seemed to be overly optimistic. However, the issue is so important that it was right to try and continue with their efforts.
The main problem for the steel sector is that, until recent times, governments have played a significant role in funding investment in many countries. Steel is often thought of as a strategic industry. Furthermore, for many developing and emerging nations, it forms a substantial proportion of total GDP. The only major producing countries to successfully divorce government and the steel industry through legally binding agreements are those in the EU. Even in these member states subsidies are allowed for research and development, certain environmental issues and steelworkers compensation for displacement.
The US proposals put forward at the Paris meeting were very similar to those operating in the EU. They would also limit government subsidies to defined capacity closures in all the major steel producing countries. The reason for the poor response from the delegates was twofold. Firstly the US were not in a position to be able to comply with their own proposition. Secondly, the EU delegation are not happy about the US unilaterally introducing barriers to trade, including section 201.
An international agreement on steel subsidies looks doomed to failure. The Chinese, Russians and Ukrainians are unlikely to sign up because their governments are already deeply involved in ownership of the steel sector. The US cannot comply. However, the US authorities would argue that, by comparison with some other nations, state and local subsidies are relatively small. Furthermore US steelmakers have not been cited by other countries in their anti dumping cases.
Supplied by MEPS International - viewpoint taken from International Steel Review - Sept 2002
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