No. 69/03
November 10, 2003

In a joint press statement issued today, the European Union—together with Japan, Korea, China, Switzerland, Norway, New-Zealand and Brazil— welcomed the confirmation by the WTO Appellate Body that each of the US safeguard measures (“201”) imposed on 10 steel product groupings by the US in March 2001 was in violation of WTO rules. The EU and its co-complainants welcome the Appellate Body Report released today which upholds the Panel’s findings and leaves the United States with no other choice but to terminate its WTO incompatible safeguard measures without delay. WTO members affected by the US measures are entitled to apply re-balancing measures upon the adoption of the Appellate Body report by the WTO Dispute Settlement Body, unless the safeguard measures are withdrawn. The EU took the requisite steps to be able to impose sanctions, back in June 2002. Consequently, unless the US removes its steel tariffs by early December, it will be subject to tariffs ranging from 30% to 8% on a wide range of US exports covering $2.2 billion worth of trade with the EU.

Background

The US Presidential Proclamation of 5 March 2002 imposed safeguard measures on 10 steel product groupings in the form of additional tariffs up to 30%. Immediately thereafter, the EC, followed by Japan, Korea, China, Switzerland, Norway, New Zealand and Brazil, engaged WTO dispute settlement procedures against the US steel safeguard measures.

The co-complainants closely co-operated at each stage of the Panel and Appellate Body procedures. The Appellate Body upheld the main violations found by the Panel in its reports of 11 July 2003 and confirmed that overall the US measures lack a legal basis because:

- none of the US measures has been taken as a result of unforeseen developments as required under the WTO rules;

- for most products imports have not increased;

- the US has excluded imports from Canada, Mexico, Israel and Jordan from the measures in a manner inconsistent with the WTO rules.

The Appellate Body report shall now be adopted by the WTO Dispute Settlement Body within 30 days. The co-complainants will ensure the timely adoption of this report to allow a prompt termination of the US safeguard measures.

For the list of products that could be subject to sanctions by the EU see Annex II of the Steel Regulation adopted by the EU in June 2002

http://europa.eu.int/comm/trade/issues/sectoral/industry/
steel/docs/steelreg100602.pdf

For more information see also :

http://europa.eu.int/comm/trade/issues/sectoral/industry/steel/index_en.htm

http://trade-info.cec.eu.int/wtodispute/show.cfm?id=166&code=1

US Steel Safeguard Measures: Questions & Answers

The WTO Dispute

What is the history of this case?

The US adopted safeguard measures on imports of certain steel products on 5 March 2002, in the form of additional tariffs ranging from 8, 13, 15 and up to 30% for a 3-year period starting on 20 March 2002. The EU, together with Japan, Korea, China, Switzerland, Norway, New Zealand and Brazil, immediately initiated a WTO dispute settlement procedure against these measures. The WTO Panel of 11 July 2003 ruled in favour of the co-complainants that the US steel safeguards are inconsistent with WTO rules because:

1) the US failed to demonstrate that the alleged increased imports were the result of unforeseen developments;

2) for most products, imports have not increased;

3) the US did not properly establish the causal link between the alleged increased imports and the purported serious injury faced by the US steel industry;

4) the US excluded imports from Canada, Mexico, Israel and Jordan from the measures in violation of WTO obligations.

The US appealed on 11 August 2002.

Why has the Appellate Body (AB) declared the US safeguards WTO-inconsistent?

In its report released today, the AB upheld the Panel report and confirmed that the US had failed to meet the basic pre-requisite conditions required before any safeguard action can be implemented, regarding unforeseen developments, increased imports and exclusion of imports from certain sources.

When will the AB report be adopted?

Article 17.14 of the WTO Dispute Settlement Understanding (DSU) provides that AB reports shall be adopted by the Dispute Settlement Body (DSB) within 30 days of their circulation. In the present case, the AB report could be adopted at the regular meeting of the DSB on 1 December 2003 and shall in any event be adopted on 10 December 2003 at the latest.

The EU countermeasures

What is the history of these measures?

In accordance with the provisions of Article 8 of the Agreement on Safeguards, on 14 May 2002, the EU notified the WTO that it reserved its rights to re-balance the adverse effect of the US steel safeguards. The EU subsequently adopted a re-balancing Regulation on 13 June 2002, which provides for the automatic application of additional tariffs on certain imports originating in the US after the final condemnation of the US steel safeguards.

When will the EU re-balancing tariffs apply?

The EU re-balancing tariffs will automatically apply from the fifth day following the date of the adoption of the AB report by the DSB, i.e., by 15 December 2003 at the latest, unless the US has removed its WTO-inconsistent safeguard measures before that date. If the AB report were to be adopted at the regular DSB meeting of 1 December 2003, re-balancing tariffs could apply on 6 December 2003, again unless the US has removed its WTO-inconsistent safeguard measures before that date.

Which products will be hit and for which value?

Products from the US concerned by the EU re-balancing measures are listed in Annex II to the Council Regulation No. 1031/2002 of 13 June 2002 [http://trade-info.cec.eu.int/doclib/docs/2003/november/tradoc_114427.pdf]. This list is not limited to steel products but encompasses a wide range of goods, from orange juice and apples to sunglasses, knitwear, motor boats or photocopying machines. The list represents $2,242 million of US exports to the EU. This amount is substantially equivalent to the value of EU steel exports affected by the US steel safeguards.

What the EU re-balancing measures consist of?

The EU re-balancing tariffs consist of additional duties of 8, 13, 15 or 30%, depending on the products. These additional duties mirror the additional tariffs imposed on EU steel exports in the context of the US steel safeguards.

What does the EU expect the US do next?

The EU calls upon the US to terminate its WTO-inconsistent safeguard action without delay and to avoid replacing the safeguard measure by any other illegal measure. Under US law, the US President has been invested with the legal authority to reduce, modify or terminate the safeguard measures since the US International Trade Commission (ITC) issued its mid-term report assessing the impact of the measures on the benefiting industry on 19 September 2003. If the US makes the right move and fully terminates its steel safeguards, the EU will proceed to repeal its re-balancing measures.

Will the EU take action before the US is given a reasonable period of time to bring its safeguards in conformity with the AB report?

The possibility for the US to be given a reasonable period of time to bring its safeguard measures in conformity with WTO obligations does not prevent the application of re-balancing measures upon the adoption of the AB report by the DSB. Re-balancing against safeguard action under Article 8 of the Agreement on Safeguards can apply as soon as the safeguard at issue has been declared inconsistent with WTO rules by the DSB. The EU has already followed this course of action in 2001 in a case concerning the US safeguard on wheat gluten.

Can the EU re-balance for the full amount notified to the WTO, without deducting the value of the US product exclusions granted in favour of EU steel exporters?

Under Article 8 of the Agreement on Safeguards, the right to re-balance is established with respect to the full impact of the safeguard measure at the time when it was adopted, i.e., $2,242 million. There is nothing in the WTO that requires re-balancing to take account of any action which might have a posteriori reduced the initial impact of the safeguard measure, such as product exclusions, which happened to benefit to EU steel exporters.

The US steel situation

Is it true that removing the US safeguards will leave US steel industry unprotected vis-à-vis foreign imports (dumped or subsidised)?

No. Many of the steel products covered by the US safeguard action are already subject to antidumping (AD) and/or countervailing duty (CVD) measures. A total of 21 antidumping orders against EU exporters are outstanding on products already covered by the safeguard measures. The termination of safeguard actions does not have any impact on the outstanding AD and CVD orders.

The US steel industry insists that safeguard measures are necessary and appropriate to offset illegal (i.e., subsidised or dumped) imports into the US. Is this true?

No, US safeguard measures are neither appropriate nor necessary. They are not appropriate because they do not distinguish between “fair” (legal) and “unfair” (illegal) trade. Indeed, they force all exporters to “pay,” including those who have done nothing “illegal” (and EU exports to US fall much more within the latter category than other origins). Furthermore, US safeguards are not necessary, given the already strong protection granted to the US steel sector via existing AD and CVD measures.

How will the removal of US measures improve international trade relations on steel?

The US safeguard measures had a strong impact world-wide and triggered a dangerous “domino effect”: several other WTO members (including the EU in September 2002) decided to impose similar measures to avoid possible trade diversion of steel products otherwise directed to the US. Removing the US measures will allow lifting these other national barriers and restoring exporters’ confidence in international steel trade. The EU has always declared that it would remove its safeguards as soon as the US would remove theirs given that the EU safeguards were only taken in response to the US measures.

An improved international climate will also enhance the chances of success of the international OECD talks on strict steel subsidy disciplines world-wide and on steel capacity reductions. By lifting the steel safeguards, and thus eliminating the biggest distorting of world steel trade, the US would certainly send a strong message to the other 40 members of the OECD steel talks to further demonstrate strong commitment to reach an international Steel Subsidies Agreement (SSA) aimed at reducing trade-distorting steel subsidies, the main responsible for global excess steel capacity.