Resolution of the ECSC Consultative Committee

on the decision by the President of the United States to introduce measures to protect the US steel industry

(adopted unanimously at the 360th session of 10 April 2002)

(2002/C 128/02)

The Consultative Committee discussed and assessed the US President's decision to impose customs duties of up to 30 % to protect the US steel industry.

The Consultative Committee does not contest any country's right under the WTO Agreement to adopt measures to protect its domestic industries if the criteria laid down in the WTO are met.

The Consultative Committee shares the view of the President of the United States of America that:

- the US iron and steel industry urgently needs to be restructured to make it viable and internationally competitive,

- exceptionally, these restructuring measures should be backed by regional and social aid programmes,

- the worldwide overcapacities in iron and steel producing plants urgently need to be permanently reduced, on the basis of common rules, in order to prevent lasting disruption of the international markets.

There should, however, as a matter of a principle, be no direct or indirect national aid to iron and steel producing companies, since such measures run counter to the principle of fair competition - the cornerstone of free world trade. National measures of this kind only serve to prop up unprofitable, inefficient and uncompetitive capacities.

The Consultative Committee is convinced that the measures adopted by the United States President are inappropriate for achieving these goals, and fears that unilateral measures of this kind will, for a long time to come, disrupt and hamper a policy of multilateral, reliable agreements under the OECD and the WTO.

The Consultative Committee, whilst recognising that the US iron and steel industry is faced with economic, social and regional problems, firmly contests the claim that they are caused by imports of steel products from third countries. Last year alone, the volume of imports into the United States fell by more than 23 %. In view of this, it is doubtful that there are sufficient grounds for taking measures under Article 201 of the US Trade Act. The Consultative Committee considers that the main reasons for the current problems of the US steel industry lie in the fact that in recent years the process of adapting capacities and technologies has not been carried through to the full, as it has been, for example, in the Community. Other reasons are the burdens placed on companies by the cost of shutdowns and of pension and sickness insurance schemes for present and former workers. The Consultative Committee does not regard the measures that have just been adopted as a suitable means for actually dealing with these causes.

The Consultative Committee sees a risk that, as a result of the measures just announced by the President, steel which can no longer be sold in the USA will flood the rest of the world market and cause lasting disruption to international trade relations. Thus the behaviour of the USA means that the international community must bear the consequences of the USA's failure to restructure its steel industry.

The Consultative Committee draws attention to its experience in industrial restructuring in the Community, including its experience in capacity reduction, technological modernisation and corporate restructuring. The fullest possible account was taken of the interests of the workers and the affected regions in terms of social security and development prospects. Whenever the process required State aid, it was provided by means of an open, transparent procedure agreed between the Member States of the Community, companies, workers' representatives, dealers and consumers. Yet during this period other suppliers continued, under multilateral agreements, to have access to the European market for iron and steel products.

The Consultative Committee fails to see any need to protect US industry by customs duties during this process. It is more likely that such protectionist measures will slow down or even obstruct the necessary adaptation processes.

The Consultative Committee sees unilateral protectionist measures of the kind announced by the US President as an obstacle to the creation of multilateral agreements to reduce worldwide overcapacities. The Consultative Committee fears in this connection that countries which use State aid to maintain uncompetitive and unprofitable capacities will continue to do so, encouraged by the United States' policy. The conduct of the United States is particularly harmful with regard to the countries applying to accede to the Community.

The Consultative Committee expresses its profound dismay that the decision by the President of the United States of America totally fails to take account of the offers made both in the context of the OECD and on the part of the Community to reduce capacities, despite the fact that the binding, verifiable and lasting worldwide reduction of steel producing capacities is precisely the declared political goal of the President. This also applies to the proposal by Mr Lamy, Member of the Commission, to set up a fund to meet the costs of shut-downs and the costs for workers' pensions and health care. The Consultative Committee considers that this proposal, in conjunction with the abovementioned internationally agreed capacity reductions, is a more appropriate instrument for dealing with crises, since it tackles the actual causes of crisis through multilateral agreements, takes account of workers' social interests, and opens up possibilities for regional development without giving rise to international trade conflicts.

Conclusions

1. The Consultative Committee supports the Commission's policy of verifying whether the measures adopted by the US President comply with WTO rules.

2. The Consultative Committee supports the Commission's temporary protective measures, including measures restricting imports, which are intended to protect the European market against the consequences of the US President's decision, without the Commission's resorting to protectionist measures itself, without hampering international market relations, and without threatening the security of supply and traditional trade flows in the European market.

3. The Consultative Committee supports the Commission in seeking, through multilateral negotiations in the WTO and the OECD, to reach a speedy arrangement with the United States which will remove any further need for this US decision and will resolve the current serious trade conflict.

4. The Consultative Committee calls on the Commission to monitor the trends in imports into the Member States in terms of both volume and price, to observe the impact on Community producers and on employment, and to report its findings to the Consultative Committee.

5. The Consultative Committee reiterates its expectations of the Commission, as expressed at its 342nd plenary session on 23 October 1998, and considers that the US President's decisions on steel imports bear out the need for such expectations.

6. The Consultative Committee calls for the acceleration and pursuance of the international negotiations being conducted within the WTO and the OECD, with a view to achieving a lasting and verifiable reduction of overcapacities worldwide. The declared willingness of the OECD member countries to reduce such production capacities by approximately 117 million tonnes for the period 1998 to 2005, and that of the Community to reduce its capacities by approximately 6-8 million tonnes for finished steel products between 2003 and 2005, afford a sound basis for achieving this objective. In the light of the Consultative Committee's experience in restructuring and modernising the European steel industry, the two sides of industry should take part in these negotiations; this adaptation process should comply with the principle that the burdens which undeniably arise should be shared fairly between nations, businesses and workers; this worldwide adaptation process under the OECD should be accompanied by an institutionalised information and consultation process. Preference should be given to using instruments such as those that were developed and successfully applied under the ECSC Treaty, and agreements should be concluded under international conventions in order to create fair conditions for international competition in the iron and steel industry. Agreement on binding environmental and social standards is a major step in this direction.