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WTO Steel Tariffs Case

WTO Steel Tariffs Case. By: Sara Scarbro, Jeremy Shulman & Stephan Smith. Contents. History and context The issue of Steel Tariffs US law WTO rules The US position The EU (World) position Decisions of the WTO The WTO panel The WTO appellate board Implementation and sanctions

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WTO Steel Tariffs Case

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  1. WTO Steel Tariffs Case By: Sara Scarbro, Jeremy Shulman & Stephan Smith

  2. Contents • History and context • The issue of Steel Tariffs • US law • WTO rules • The US position • The EU (World) position • Decisions of the WTO • The WTO panel • The WTO appellate board • Implementation and sanctions • Our proposal

  3. History and Context Economic background of Steel • Very competitive industry • Countries entering the market in manufacturing of steel products • Newer facilities • Lower wages • Results in overcapacity • Traditional steel manufacturing economies have remained competitive with subsidies

  4. History and Context Political background in the US • US has been producing steel in the states of West Virginia, Pennsylvania & Ohio since 1901 • Significant amount of the economy of each of these states in centered around the steel industry • These states politically important in 2000 and 2004 presidential elections • Bush campaign promises • Has to produce something while in office • Protectionist measures can be spun into a political “win-win”

  5. History and Context USTR asked ITC to initiate a safeguard investigation on June 28, 2001 • Determine if certain steel products were being imported in increased quantities, which could threaten domestic producers • Regarding CCFRS, hot-rolled bar, cold-finished bar, rebar, FFTJ, stainless steel bar, stainless steel rod & welded pipe ITC recommends that tariff and tariff-rate quotas be imposed for certain products

  6. The issue of steel tariffs-US safeguard actions Role of the ITC to recommend safeguards: • Determine that imports have increased • Define the domestic industry that competes • Determine whether serious injury has occurred to the defined industry • Prove causation

  7. The issue of steel tariffs-US safeguard actions The Role of the President to determine appropriate safeguard remedies • 1974 Trade Act, Section 203 • The option to increase duties, impose quotas or tariff rate quotas, or enter into agreements • President given broad discretion whether to follow the recommendations of the ITC

  8. President Bush imposed definitive safeguard measures on imports of certain steel products Pursuant to Proclamation 7529 on March 5, 2002 Tariffs ranging from 8-30% Imports from Canada, Mexico, Israel & Jordan were excluded Effective on March 20, 2002 and effective for three years and one day The issue of steel tariffs-US safeguard actions

  9. The issue of steel tariffs-WTO rules Article XIX of the GATT 1994: “Emergency Action on Imports of Particular Products” • Increased imports injure producers of “Like or directly competitive products” • Import relief given “for such as may be necessary to remedy”

  10. The issue of steel tariffs-WTO rules Agreement on Safeguards • WTO members may apply import restrictions as safeguard measures if certain prerequisites are met • Article 2.1: Countries have the right to such safeguards only if the prerequisites are shown to exist • Article 7: No more than 4 years, unless extended

  11. Complainants against the U.S. • The EU was the first to launch a complaint against the US in the WTO • The following countries later signed on as complainants • EC (6/3/02) • Brazil (7/29/02) • China (6/24/02) • Japan (6/14/02) • Korea (6/14/02) • New Zealand (7/8/02) • Norway (6/24/02) • Switzerland (6/24/02)

  12. U.S. Position The position of the US Steel industry in 2001 • U.S. steel industry faced crisis • 20 year price lows • 27 bankruptcies • USITC conducted an “exhaustive investigation”

  13. U.S. Position Actions of the President based on ITC recommendation • The President established safeguard measures on 10 steel products (per the USITC) • U.S. consulted with WTO members under the “Safeguards Agreement” • U.S. applied the safeguard measures • Safeguards complied with WTO exemptions

  14. World Position (Complainant arguments) • “ITC did not define the like product” • ITC didn’t properly determine the ‘unforeseen developments’ that could hurt the U.S. steel industry • Imports of the 10 safeguarded steel products did not increase • Imports didn’t cause or threaten the 10 U.S. steel industries • Safeguard measures issued by POTUS aren’t in compliance with WTO agreements

  15. U.S. Position (Rebuttal to arguments) • Complainants blurred the definitions of industries • ITC did identify unforeseen developments • Imports of all 10 safeguarded steel industries spiked between 1998 and 2000 • Increased imports to U.S. coincided with declines in the U.S. industries • Safeguard measures comply with WTO obligations

  16. Consultations in the WTO March 2002 – EU issues formal complaint, requests consultations with the U.S. • If no agreement within 30 days, EU can request a panel in the DSU • EU threatens retaliation for steel tariffs

  17. DSU Panel Decision • Summer 2002 – Single Panel Established in the DSU • March 2003 Ruling • US measures violate Agreement on Safeguards under the GATT • US plans to appeal

  18. Decisions of the Appellate Body November 2003 Ruling • Appellate Body upholds panel’s decision • Reversed one panel finding on link between increased imports and harm for two out of ten products • US has 30 days to comply

  19. Possible Sanctions Complainant’s sanctions as authorized by WTO/DSU: • US given 30 days to implement or face sanctions • EU threatens punitive duties on politically sensitive US exports totaling $335 million • Additional sanctions from other countries

  20. Implementation • December 2003: Bush lifts steel tariffs • Threat of sanctions is removed

  21. Our Proposal-US context Presidential discretion in ITC recommendations for safeguard issues should be limited as they are with dumping and subsidy cases • Foreign policy reasons in 1974 Trade Act are outdated • More suppliers in the global market gives the US more flexibility in trade of products vital to national interests

  22. World Steel Production in 1980 26 Countries 454,035 million metric tons produced World Steel Production in 2005 60 Countries 1,105,829 million metric tons produced Our Proposal-US context

  23. Our Proposal-International context Better written WTO agreements to determine when safeguards are allowed • WTO agreements need to be rewritten to limit ambiguity • Easier for members to follow with clearer domestic legislation in accordance to new WTO definitions

  24. References United States – Definitive Safeguard Measures on Imports of Certain Steel Products, Dispute DS259, World Trade Organization, 22 February 2006, www.wto.org/english/tratop_e/cases_e/ds239_3.htm. International Iron and Steel Institute, “steel statistic archive,” www.worldsteel.org. Paul Bluestein, “EU challenges US steel tariffs at WTO” Washington Post 8 March 2002: E03. Understanding the WTO: Settling Disputes, World Trade Organization, 22 February 2006 http://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm.

  25. References “Bush tries to defuse trade tensions with Europeans, EU could retaliate for border tax” St. Louis Post-Dispatch 3 May 2002: C2. Tracy Sutherland, “Payback is EU’s tough stand on US steel Tariffs” The Australian 20 May 2002: 32. “US steel tariffs not enough” The Montreal Gazette 24 August 2002: E8. United States – Definitive Safeguard Measures on Imports of Certain Steel Products, Dispute DS259, World Trade Organization, 22 February 2006, www.wto.org/english/tratop_e/cases_e/ds239_3.htm

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