2023-10-19 21:28:37
Commission President Ursula von der Leyen wants to announce two successes after the EU-US summit in Washington this Friday: the final end of American protective tariffs on steel and aluminum from the EU and a raw materials agreement. It remains to be seen whether this will happen. This applies in particular to protective tariffs.
When von der Leyen arrived in Washington on Wednesday evening, both sides were far apart on this point, according to the European Commission. The chances of concluding the raw materials agreement, which is intended to give Europeans broader access to the American $369 billion Inflation Reduction Act subsidy package, are assessed as better.
The then US President Donald Trump imposed tariffs of 25 percent on steel and 10 percent on aluminum in 2018. The background was the large overcapacity on the world market. The EU responded with counter tariffs on various US products from bourbon to Harley-Davidson motorcycles.
Under Trump’s successor Joe Biden, the EU and the USA agreed at the end of October 2021 to partially lift the tariffs and proclaimed an “International Agreement for Sustainable Steel and Aluminum”. However, the suspension was limited to two years. If there is no permanent solution or at least an extension of the suspension by the end of October, tariffs will apply again from 2024.
The situation on the steel market has not changed since 2018. On the contrary: the OECD assumes that in 2025 demand of around 2 billion tonnes will be offset by crude steel capacity of around 2.6 billion tonnes. This is mainly due to China. The country produces one billion tons, half of the world’s steel. For comparison: Germany, as number one in the EU, accounts for 40 million tonnes per year.
USA wants a common protection rate of 25 percent
Against this background, the Americans are urging that the EU and the USA jointly impose a tariff of 25 percent on steel from all countries that are not classic market economies. Ultimately this is aimed at China. The agreement could form the basis for a kind of steel club open to other market economies such as Canada, Great Britain or Japan. The European Commission agrees with this in principle.
However, it insists that these tariffs are imposed in accordance with World Trade Organization (WTO) rules. The EU would then use the protective clauses, anti-dumping and anti-subsidy procedures available to it as instruments for this. It recently initiated such an anti-subsidy procedure to impose punitive tariffs on the import of electric cars from China.
Hendrik Kafsack, Brussels Published/Updated: , Recommendations: 6 Hendrik Kafsack and Karl De Meyer Published/Updated: , Recommendations: 8 Marcus Theurer Published/Updated: , Recommendations: 9 A comment from Alexander Armbruster Published/Updated: Recommendations: 34
However, the Americans are not yet prepared to do this because the EU cannot guarantee a specific tariff rate on this basis and such procedures are always subject to a certain degree of uncertainty. They are demanding concrete tariff commitments. The decisive factor for an agreement could be whether the responsible trade commissioner, Valdis Dombrovskis, or President von der Leyen prevails within the commission. Both take part in the summit. Von der Leyen is seen in Brussels as more willing to accept a solution that is not 100% WTO-compliant.
MEP Lange: No agreement at any price
The chairman of the Trade Committee in the European Parliament, SPD MP Bernd Lange, warned before the summit: “We should not force an agreement at any price.” Under no circumstances should the EU agree to a framework that undermines the WTO and weakens the multilateral trading system and lead to even more protectionism and fragmented globalization. Agreeing in advance on a specific tariff rate on Chinese steel must be taboo. A tariff must be based on an investigation, evidence and damage to EU industry. The European Parliament must agree to a steel agreement.
The Americans’ second condition is also difficult for the EU. In a next step, the Europeans and Americans should create global incentives for the production of green steel and aluminum within the framework of the agreed “International Agreement on Sustainable Steel and Aluminum”. This amounts to additional trade hurdles for steel from China, which has so far been produced largely with coal. It is also about whether the USA will be exempt from the CO2 border tax (CBAM), which the EU will levy on steel and aluminum from countries without comparable climate targets from 2026.
With the conclusion of the raw materials agreement, the EU would have access to a large part of the subsidies from the Inflation Reduction Act that are reserved for US industry. The prerequisite for this is actually a free trade agreement with the USA. Biden could, however, classify the raw materials agreement as equivalent.
In the end, it is likely to only cover five of the 50 minerals affected by the Inflation Reduction Act: cobalt, graphite, lithium, magnesium and nickel. These five play a major economic role, not least for the production of batteries. This would allow European companies to participate in the supply chains for the production of batteries for electric vehicles. This is also in the interests of the USA because they have so far had great difficulty producing such batteries themselves in sufficient numbers.
#USA #struggling #find #solution #dispute #steel #tariffs