1 / 25

Bush Steel Tariffs Case.

Bush Steel Tariffs Case. Kurt Kasun Tarek Khedr Michelle Lammers Sandrine Mabya. No Steel Industry. What would Suffer?? National Defense Economic Security Homeland Security Global Environment. European Union. European Coal and Steel Community (ECSC) April 18, 1951

larissa
Download Presentation

Bush Steel Tariffs Case.

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Bush Steel Tariffs Case. Kurt Kasun Tarek Khedr Michelle Lammers Sandrine Mabya

  2. No Steel Industry What would Suffer?? • National Defense • Economic Security • Homeland Security • Global Environment

  3. European Union • European Coal and Steel Community (ECSC) • April 18, 1951 • Steel tariffs are low, removed in 2004

  4. Why Protect Steel • Jobs • Security • Related Industries

  5. US Steel – History & Context • The US is the largest steel importer in the world, importing over 26% of global steel imports between 1997-2001, followed by the EU at 16%. • Throughout the 20th century, 85% of non-US steel was tied to government ownership or control, cartels, or subsidies. • WTO rules allow countries to impose temporary “safeguards” when increased imports have caused substantial serious injury to competing domestic industries.

  6. US Steel & Politics • When Bush began his first term campaign, nearly 47,000 steel and iron jobs had vanished. • President Bush and Vice President Cheney boxed themselves in politically during the 2000 campaign by pledging to come to the aid of steelworkers. Those promises helped Bush beat Al Gore in West Virginia.

  7. The Steel Action Plan for America • In June 2001, the Bush Administration announced its plan to “correct” distortions in the world steel market produced by government interventions. • On March 5, 2002, the US imposed "safeguard" tariffs of up to 30% on about a third of the steel imported into the U.S. In exchange for three years of protection, the steel industry was required to commit to restructuring that would cut costs and shed excess capacity.

  8. Market Problems: Pricing & Unions • “Steel prices are still archaically determined by product weight; quality and value are not reflected in the price, merely tonnage…" –steel market analyst. • Steel pricing is characterized by a lack of public transparency. • The United Steel Workers of America mobilizes lobbying campaigns and blames each Administration for industry-related problems: “The Bush Administration, for example, has steadfastly refused to help provide relief for the more than 200,000 Steelworker retirees, surviving spouses and dependents whose health care benefits have been wiped out by unfair trade, bankruptcy and liquidation. The USWA fully intends to hold the Bush Administration accountable…”

  9. Act Bending & Steel, Peoria, Ill. Bethlehem Steel, Bethlehem, Pa. East Coast Sheet Metal, Willards, Md. Edgewater Steel, Oakmont, Pa. Erie Bronze & Aluminum, Erie, Pa. Erie Forge & Steel, Erie, Pa. Excaliber Tubular, Ballwin, Mo. Form Tech Steel, Temperance, Mich. Freedom Forge, Burnham, Pa. Great Lakes Metals, Bridgeview, Ill. GS Industries, Charlotte Hannibal Iron & Metal, Hannibal, Mo. Heartland Steel, Terre Haute, Ind. Industrial Metals of the South, Fort Lauderdale Laclede Steel, St. Louis Mountain Metal Products, Margaretville, N.Y. National Metal Technologies, Oceanside, Calif. Northwest Structural Steel, Wauconda, Ill. Ottawa River Steel, Toledo, Ohio Precision Specialty Metals, Los Angeles Ranken Ironworks, Champaign, Ill. Renco Group, New York Riverview Steel, Glassport, Pa. Smith Steel Casting, Marshall, Texas Southeastern Steel, Florence, S.C. Specialty Steel Machining, Hammond, Ill. Swedish Metal, Pendergrass, Ga. Wheeling-Pittsburgh Steel, Wheeling, W.Va. Winthrop Steel, Fitchburg, Mass. Since 2000, more than 30 steel mills have filed for bankruptcy protection, including:

  10. EU perspective The EU warned the US that it would start imposing up to 2.2 Billions worth of counter tariffs on US imports On March 25,2002, The EU imposed restrictive tariffs quotas based on the average of the annual level of steel imports in the years 1999 ,2000, 2001,plus 10% thereof. The EU’ s proposed sanctions targeted regions that the Bush Administration viewed as crucial to reelection campaign in 2004.

  11. The EU targeted regionsSource: WWW.pbs.org/.../july-dec03/steel_11-17.html

  12. 15 members of the European Union and seven other nations complained to the WTO • Japanese Government highlighted the legal flaws of the US action under the dispute settlement mechanism • China’s Ministry of Foreign trade said it would reserve the right to appeal the U.S steel safeguards to the WTO • South Korean government said that these actions were threatening to the integrity of the World Trade Organization

  13. Table 3. Scope for retaliation under two standards( millions of dollars)Source: International Economics Policy Briefs, 10/2003 Complainant Exports lost Exports covered ______________________________________________ European Union 526 1900 Japan 119 418 Korea 151 507 China 21 110 Switzerland 4 17 Norway 2 7 New Zealand 11 33 Brazil 30 107 Total 900 3100 _____________________________________________

  14. Panel Decision • The panel established on June 3,2002 had to examine the consistency of the safeguards measures • Japan and Korea brought also their complaints to the panel based on Art.9.1 • China, Norway, Switzerland on June 24,2002 • On July 8, New Zealand, then Brazil on July 29, 2002

  15. Panel Decision • They all claimed the inconsistency of the measures applied on imports of certain steels based on Articles 2,3,4,5,7,8,9,&12 of the agreement on safeguards and Art.I,II,X,XIII,& XIX of the GATT 1994 • On July 11,2003 the Panel issued to the members of the WTO eight Panel Reports in the form of one document.

  16. The safeguards measures were inconsistent • The US failed to provide a reasoned and adequate explanation of how the facts supported its determination with respect to “increased imports.”( Articles 2.1 & 3.1) • The US failed to show a “causal link” existing between any increased imports and serious damage to domestic producers. (Article 4.2(b) • The US failed to comply with the requirement of parallelism between the products for which the conditions for safeguards measures had been established and the products which were subjected to the safeguard measure. • The US failed to provide adequate explanation demonstrating that unforeseen developments resulted in increased imports causing injury • The Panel recommended that the DSB request the United States to bring all the safeguards measures into conformity with its obligations under the Agreement on Safeguards and the GATT 1994

  17. The Appellate Body • The appellate body upheld the Panel’s conclusions concerning the complaints of China, the EU, New Zealand, Norway and Switzerland, that the application of all safeguard measures was inconsistent with the requirement of Article XIX:1(a) of the GATT 1994 and Article 3.1 of the Agreement on safeguards • It upheld the Panel’s conclusions that the application of the safeguards measures on imports on steels is inconsistent with the requirements of Articles 2.1,3.1,4.2(b) of the agreement on Safeguards. • It found that the U.S. did not substantiate the claim raised under the Article 11 of the DSU • It recommended that the DSB requested the U.S. to bring its safeguard measures found inconsistent into conformity with its obligations under those Agreements

  18. Bush Ends Temporary Tariffs on Steel Imports; Sec. Evans Declares ‘Victory’ • Intent was to give industry “breathing room” • Safeguard measures result in “Mission Accomplished” • Industry consolidation and restructuring has increased US productivity and lowered production costs • PBGC is now in a position to pay 90% of the benefits of bankrupt companies • US Steel industry now poised to benefit from a growing US and global economy • Continue to promote a level playing field for American steel producers and workers by closely monitoring import data

  19. ITC’s Analysis: The Safeguard Worked • Profitability has returned • Prices have stabilized • Additional costs imposed on consumers was limited • Three largest steelmakers invested $3B to consolidate flat-rolled sector Source: Barrons

  20. Industry Consolidation/Debt Restructuring • ISG best typifies consolidation which has occurred • Bethlehem Steel • LTV • Acme, Weirton Steel • ISG now part of Mittal—world’s largest steel company Source: Mittal

  21. Boom Times for the Steel Industry

  22. Case Study:Wheeling Pitt • 18 months out of bankruptcy • Reasons for success: • Decline in the US Dollar and steep freight rates lead to a dearth of imported steel • New pig-iron and scrap iron Electric Arc Furnace (EAF) make it less vulnerable to higher raw material costs • Only Western Hemisphere company capable of pouring liquid blast-iron-furnace steel directly into an EAF • Sees continued pricing power, and end-user demand • Have own coking coal facilities Source: Barrons

  23. New Industry Issues Trump Tariffs • Will China continue to drive world demand? • Will they become a net exporter? • “[Tariffs] will have absolutely no impact on the steel companies. We don't need protectionism for the steel companies. It has helped up to now. It allowed the whole steel industry to restructure. But steel prices are going to go up so much in the next six months, lifting the tariffs isn't going to matter.” • “[Steel] stocks have done very well and steel prices have more than doubled….They hit our price targets and we sold. There has been some supply coming on in China, and so this is one area in commodities where there is not a favorable supply-demand situation. With steel prices more than twice where they were a year ago and more than twice the long-term level, it is just not a good risk-reward any longer by my standards. It is possible, too, that China will be a net exporter in the next 12 months, and that would be a negative for steel prices.”

  24. Sources • http://www.manufacturing.net/ind/index.asp?layout=documentPrint&doc_id=99701 • http://www.metalcenternews.com/2002/May/MCN0205f5Tariffs.htm • http://www.wsws.org/articles/2002/apr2002/stee-a26.shtml • http://pages.zdnet.com/trimb/id178.html • http://www.iie.com/publications/pb/pb03-10.pdf • http://www.internationaltraderelations.com/WTO.Steel%20(Bush)%20(AB%2011.10.03).htm • Cox, James. USA Today: “Bush slaps tariffs on steel imports.” March 6, 2002 • Uswa.org

More Related