US toughens steel protection

by Abid Aslam

Washington, Aug 6 (IPS) -- Hopes of an easing of restrictions on imports from cash-strapped nations have been dealt a blow by the latest effort to shield US steel producers from foreign competition, according to trade analysts.

President Bill Clinton declared this week he would approve special financing for US firms, take a hard line against 'dumping' at the WTO, and block international loans containing subsidies for foreign steel.

Details of the proposals and their exact impact remained unclear, but were reminiscent of the US administration's earlier attempts to satisfy domestic constituents by making a "whipping boy" of multilateral trade and financial institutions, said one international finance official.

In particular, the tougher anti-dumping stance "could be a big issue at the Seattle ministerial (meeting of the WTO, scheduled for late November)," added Gary Hufbauer, trade expert at the Washington-based Institute for International Economics.

"The (Clinton) administration is staking out a status quo position" by upholding stringent anti-dumping agreements. This was at a time when other countries hope to use the next round of global trade negotiations to limit such measures, according to Hufbauer. Washington "is signalling that it will, at least, turn a deaf ear to South Korea, Brazil and anyone else" with reform proposals, he said.

By contrast, Clinton has not been able to ignore increasingly angry steel producers and the industry's main labour union, who have assailed the administration for failing to stem a surge of imports since 1997. That was when the collapse of Asian currencies dried up the world's fastest-growing market for steel, creating a global glut and forcing producers to slash prices.

In turn, steel makers sought out US markets in a bid to export their way out of trouble. For countries like South Korea, Russia and Brazil, that strategy was part and parcel of financial bail- outs engineered by the US Treasury and the International Monetary Fund (IMF).

US producers, suffering increasing global competition since the 1960s, complained that cheap steel imports reached record levels last year. This led at least three publicly-traded firms to declare bankruptcy and caused more than 10,000 workers to be laid off.

Seething discontent among labour groups has plagued Vice President Al Gore's attempts to get them to support his bid for the presidency next year.

Steel plants are concentrated in key electoral states in the US Northeast and Midwest, and the 700,000- member United Steelworkers of America (USWA) so far has refused to endorse Gore's campaign.

Relations improved in the lead up to Clinton's announcement but business and union officials remained cautious.

The initiative "does not automatically guarantee the steel crisis will be solved but it does provide an opportunity to develop trade policies that ensure other countries play by the rules," said USWA President George Becker.

Clinton's proposals included:

* Quick approval of legislation just passed by Congress, providing federal guarantees for one billion dollars in loans for steel firms (and 500 million dollars for oil and gas companies).

* A comprehensive Commerce Department review of existing government subsidies of foreign industries and other "market- destroying trade barriers."

* Continued enforcement of anti-dumping laws, which penalised foreign producers deemed to be selling at prices unfairly below market levels, coupled with threats of sanctions against Japan to keep its steel exports to the United States below pre-crisis levels.

* A high-level international conference on "unfair practices that support economically unjustifiable steel capacity."

The administration also said the Commerce Department would beef up its monitoring of steel imports, assessing the potential for dumping and taking measures to head off problems rather than waiting for industry or unions to complain once shipments already had been dumped on US shores.

USWA and steel firms had complained that existing measures were cumbersome and forced them to lodge after-the-fact grievances that took a long time and had to be handled for one kind of steel at a time.

As soon as one country reduced its exports of a certain type of steel, others stepped up their shipments, they said. In recent years, complaints were filed against Argentina, Brazil, China, India, Indonesia, Japan, Russia, Slovakia, South Africa, South Korea, Taiwan, Thailand, Turkey and Venezuela.

The US union had sought a sweeping solution to the problem in the form of federal legislation mandating global quotas on steel shipments. The House of Representatives approved the measure in March but the Senate, with backing from senior administration officials including USTR Mrs. Charlene Barshefsky, quashed it in June.

Administration officials opposed the bill on the grounds that it would run foul of the WTO and because they believed major reductions in imports from key emerging economies wold make it more difficult for them to recover from financial crisis and prevent them from importing US goods.

In any event, "existing anti-dumping laws heavily favour local petitioners and really amount to quotas in the first place, so the quota bill was largely superfluous," said Hufbauer. "The big thing... is the loan programme, which is a major concession to companies in financial distress."

Less compelling, the veteran trade analyst and former government official added, was an administration pledge to block World Bank and IMF loans that would subsidise foreign steel.

"It's mainly rhetoric," Hufbauer said of the promise. "This is not something the IMF does and the Bank's involvement is limited. If this were a problem, it's now about five years old."

International financial officials acknowledged privately that some recent emergency assistance loans to crisis-stricken countries may have indirectly benefitted steel production there.

Additionally, the steel industry may have been indirectly aided by World Bank infrastructure loans but no money had been ploughed directly into production, since the agency's emphasis in recent years has been on privatisation and industrial reforms.

"It's not the first time they've tried to use the World Bank as a whipping boy to satisfy a domestic constituency," said one source. "It won't really make a difference."

The above article by the Inter Press Service appeared in the South- North Development Monitor (SUNS) .