The EU has scored another victory in its trade war with the US. The WTO has recently found the prohibitive steel import duties introduced by Washington in March 2002 to be unjustified. “This decision is important not to the EU alone, it is an absolute victory,” said Arancha Gonzales, an official EU representative at the WTO. This is good news for Ukraine, since the prohibitive duty has ousted Ukrainian metal exporters from the American market. As a result, Kryvorizhstal and the Illich Metal Combine lost nearly $300 million. Although the US has never been a priority for Ukraine’s metals exporters, it is the world’s biggest steel importer, and cutthroat competition for the US steel market may not be too far off.
However, this will not happen unless Washington officially recognizes its mistake in imposing the duty. The White House has already lodged an appeal against the WTO decision, and the court is not expected to return a verdict before December. The US has recently been pursuing a foreign policy of unilateral preventive steps, and it will be small wonder if the Bush Administration simply rejects the WTO demands. The EU has already warned that, should this happen, in 2004 it will impose prohibitive duties on American imports worth $2.2 billion. Fire is best fought with fire.
Last year, Americans lifted limitations on imports from a number of countries, cutting by a third the list of steel products subject to prohibitive duties. The prohibitive duties have been reduced from 30 to 24%, on average. However, the possible reduction of duties to the 14% rate demanded by the WTO could prove a death sentence for American steel-makers.
US metallurgy has teetered on the verge of bankruptcy for the past couple of years, and only the prohibitive duties introduced last year averted a major crisis. The American Steel Manufacturers Association (ASMA) is one of the most influential lobbies in the US. During the last presidential campaign it actively supported the Republicans, and George W. Bush is repaying its political investment in full. However, with the expensive workforce and low quality management of the industry (no matter how strange this may sound with respect to America) the prospects for the American steel-makers have come to naught. The more so that machine builders and defense enterprises, the major steel consumers in the US, are getting more and more dissatisfied with the high price of American metal. Over the last year, steel prices in the US more than doubled, which threatens to undermine the American economy in the face of low-priced foreign competition.
Understanding it is fighting a losing battle for the domestic market, the ASMA has approached the White House with a new initiative to impose quotas on steel imports from Ukraine, Russia, China, and South Africa. Under the proposal submitted to the US International Trade Commission, each of these countries’ share of the American metals market may not exceed 1.5%. Among the major arguments in favor of such a step American producers cite the risk of an eventual suspension of domestic steel production.
In this situation, Kyiv remains an interested observer, since Ukraine is yet to joint the WTO. If quotas are imposed on steel imports from Ukraine, the Ukrainian government will not even be able to respond adequately. President Kuchma has instructed the Cabinet of Ministers to make sure that Ukraine joins the WTO by the end of this year, except that this seems unlikely to happen, for without Pres. Kuchma’s political intervention the parliament will not enact the legislation adapting Ukraine’s system of export and import regulations to WTO standards. Our lawmakers seem too preoccupied with other important matters. Unless Ukraine joins the WTO in the first quarter of 2004, our country’s losses will be measured not only in dollars, but also in humiliating terms of trade on foreign markets.
