US DENOUNCED AT GATT COUNCIL OVER ITS 'STEEL CURTAIN"

Feb 11, 1993

US DENOUNCED AT GATT COUNCIL OVER ITS 'STEEL CURTAIN"

Geneva 9 Feb (Chakravarthi Raghavan) -- The United States was denounced Tuesday at the GATT Council over its recent actions in levy of countervailing duties on imports of steel from Brazil on charges of subsidisation and levy of provisional duties on imports from 19 others on charges of dumping.

The United States did not appear to have given any ground to its critics, and Andy Stohler, the second ranking official at the delegation, arguing that the actions were consistent with GATT rules and the Tokyo Round codes.

Virtually every delegation that participated in the discussion raised by Brazil assailed the arbitrary way in which the US found 'dumping' on the basis of 'best information' available, which was information provided by the US domestic producers seeking protection, while ignoring all evidence from the enterprises charged with dumping.

Brazil, Argentina among others also underlined that the US actions had done damage to the efforts in their countries to privatize the industry and could jeopardise the economic reform programmes.

Many delegations also saw the issue as going beyond the particular dispute, but one touching the credibility of the GATT trading system. A number of delegates also made the point that the such issues and disputes would be best resolved by the conclusion of the Uruguay Round of multilateral trade negotiations as well the efforts to negotiate a Multilateral Steel Agreement (MSA).

But Brazil which raised the US actions in the Council however differed from the view, which the US officials had advanced in their actions, suggesting their actions would help speed up the conclusion of the MSA under which the US has been seeking zero tariffs on steel imports in return for commitment of countries to abolish all subsidies.

According to the GATT spokesman, who briefed the press on the Council, there was no reference by the delegations to the US demand for changes in the text on anti-dumping rules in the Dunkel text -- changes that would in effect put beyond challenge in the GATT dispute settlement system, the findings and appreciation of evidence of its own investigations.

The Council took no action, merely taking note of the discussions. Both the European Community and Brazil have sought consultations over the issue with the United States, an essential preliminary step to their raising a dispute in the GATT -- probably in the Tokyo Round Committee administering the subsidies code and the one on anti-dumping and countervailing actions.

The US had announced on 27 February a final determination about subsidisation of steel from Brazil and had also made a preliminary determination in anti-dumping investigations involving steel imports from 19 countries.

In raising the issue in the Council, Brazil's Amb. Celso Amorim said all of the most active trading countries in steel had been affected and involved billions of dollars. A long list of steel products had been virtually banned from the US market both as a result of the preliminary levies of anti-dumping duties as well as the "chilling effect" of investigations and as depicted in the Brazilian press a "steel curtain" had descended on the United States. Apart from the various reasons of each of the parties over the unfairness of the many unwarranted anti-dumping and countervailing actions, there was a common perception that the actions constituted a serious factor of tension for international trade.

"A heavy cloud of uncertainty is now hanging not only over the provisions of an improved multilateral trade system, but also over the rules governing the GATT...What no one can accept is that domestic legislation and trade policy instruments be used to harass more efficient competitors."

The Brazilian delegate complained of the damaging effect on his country's privatization policies as a result of the US determination in calculating the earlier equity subsidies paid by the government to the State industry as a subsidy to the private owners, even when the latter had bought the industry in a public auction at market value. The way US determinations had been made including the easy recourse to the 'best information available' criterion had resulted in assessment of high artificial subsidies and dumping margins for recently privatized Brazilian mills.

These had raised difficult questions over privatization of industry and jeopardised the entire privatization programme for the steel sector. Brazil was not being offered by this new protectionist wave under the guise of antidumping and countervailing actions in the US "any support to its privatization and liberalization efforts", nor would it contribute, as claimed by US officials, to the acceleration of negotiations for a MSA.

Argentina's Amb. Lanos said the US actions had brought in an additional point of conflict in the final phase of the Uruguay Round and would affect the privatization programme in his country. In respect of a number of countries, Determination of injury by steel imports had been made in respect of a period when there were VERS.

In other comments, Austria made the point that its total steel exports in the first six months of 1992 had been just 700 tons, which could not have caused any injury to the US industry. Yet action had been brought and the legal costs incurred by Austria in the investigations far exceeded the total value of the exports.

Sweden, speaking for the Nordic countries, noted that Swedish steel exports to the US accounted for just 1.6 percent of the US market, and Finland's to 1.5 percent. With such small shares it was difficult to understand the US determination of injury by dumping. The calculations had been made, not on information supplied by the exporters, but on 'best information available', namely that supplied by the US producers.

Making a similar point, Poland complained that information from its exporters had been brushed aside in favour of arbitrary calculations based on best available information.

Canada noted the 20-year protection that had been enjoyed by the US industry and warned that the US actions would have an adverse effect on the trading system.

Korea's Amb. Soo Gil Park sharing concerns of Brazil and others,and said that in terms of successfully concluding the Uruguay Round, the US action was "very poorly timed" and would also have an "adverse impact on the MSA negotiations". And if other countries follow the same path (as the US), "we will face an avalanche of trade-dampening measures and the multilateral trade system may be put in jeopardy".

Park also found "troubling" the US explanation that this was all a followup of actions initiated under the Bush administration. The Clinton administration was in its third week, and "we have yet to see a solid sign that it is committed to the GATT-based multilateral system and the Uruguay Round". Last week they had taken actions to support US telecom industry and there was talk of further steps to support its automobile, oil and semi- conductor industries and the idea that the US might withdraw from the government procurement code.

"All these do not augur well for the future of the GATT at this point of time," Park said.

Park questioned the view that the actions were "purely commercial". He pointed out that there were 84 complaints of dumping and filed soon after the expiry of the voluntary export restraint agreements in steel, and determination of "exorbitant" margins, in some cases exceeding 100 percent. It was also difficult to understand how the US steel industry could have been 'seriously injured' by the imports considering the previous 10 years of VERs.

Very "debatable information" had been used in the actions, the 'best information' relied upon by the US was data supplied by the US steel industry. "If this is true, and if the US Commerce department simply followed mandated procedure, we cannot but conclude that US anti-dumping laws have serious shortcomings".

In the countervailing actions (against subsidies) announced in November, the US Commerce department had based their determination on a benchmark interest rate that took into account "even private curb market interest rates" which was not reasonable at all. Korea's financial institutions were also accused of giving preference to the steel industry and by selectively approving foreign loans. The very same charges were rejected by the Commerce department in 1982 and 1984, but has now been accepted, contradicting its own earlier decisions.

The European Community's John Beck said the US action was the latest in its massive assault on the world steel market and was totally unjustified. The EC found the US actions and determinations on the basis of 'best information' totally unfair. The US should return to the negotiating table on the MSA, Beck said.

Malaysia, New Zealand, Hong Kong, Japan and Hungary were among those who spoke critically of the US actions.

However, Stohler insisted that the US actions were in accord with GATT rules and codes. The decisions which were only 'preliminary' did not cover the issue of 'injury' which would be determined by the International Trade Commission (ITC). If no injury was found there would be no final determination on the duties, he said. The world steel market was currently "very soft" and this was driving many exporters to "dump", forcing the US actions.

The EC however said the US response was not satisfactory and the issue was not just a matter of procedure. The US actions were jeopardising the trading system, and it was not a question whether the market was soft or hard.

Earlier, the Council heard a Brazilian complaint arising out of US restrictions on imports of woollen clothing from Brazil put in place early in 1992. The trade in this sector is governed by the Multifibe Arrangement which is overseen by the Textile Surveilance Body (TSB).

The US had imposed quantitative restrictions after bilateral talks with Brazil, aimed at getting voluntary restraints on imports had failed. Brazil had raised the issue before the TSB and as a result consultations took place between the US and Brazil but which failed. Brazil sought a second ruling from the TSB, but with no satisfactory outcome and has now brought the issue before the GATT Council and also sought the 'good offices' of the GATT Director-General to resolve the dispute.

Brazil was supported by a number of textile exporting countries.

The US however said that it had abided by the TSB ruling and had engaged in consultations. Brazil had put informally put forward proposals which the US found unacceptable. In the US view it would be a dangerous precedent to bring the TSB proceedings before the GATT Council.

The GATT Director-General noted that under the 1966 decision of the GATT CPs, Brazil, as any other developing contracting party, had a right to invoke his good offices. But he also note of the intention of both sides to have the issue settled in the TSB and urged that the consultations should be taken up urgently there.

In other actions, Swaziland became the 106th contracting party, taking the simple route of Art. XXIV under which any former colony to which the GATT rules had applied and which had been continuing the application provisionally, could become a member in its own right by a simple notification.

The protocols of accession of the two constituent units of the former Czechoslovakia -- the Czech and Slovak Republics -- were also adopted by the Council and is now put up for a postal ballot vote of the CPs where a twothirds majority vote is needed. After the protocols are thus accepted, and the two undertake their own legislative ratification processes, the Czech and Slovak republics will become GATT contracting parties. At present, Czechoslovakia (having ceased to exist as a state) is no longer a cp, and the two are yet to become cps.