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EU Works on Countermeasures Against US Tariffs on Steel and Aluminium, Including Possibility of Safeguard Measures Affecting Imports from All Non-EU Countries

On 8 March 2018, the US issued two Presidential Proclamations on adjusting imports of steel and aluminium into that country, announcing President Trump’s decision to impose a 25 percent ad valorem tariff on certain steel products and a 10 percent ad valorem tariff on certain aluminium products as of 23 March 2018.

In the two Presidential Proclamations, President Trump invited all countries with which the US has a security relationship to discuss satisfactory alternative ways for responding to the alleged threatened impairment of the US’ national security resulting from the imports of steel and aluminium products. For the time being, only Canada and Mexico have received an exemption from the US tariffs, and even that depends on the renegotiation of the North America Free Trade Agreement.

In order to obtain an exemption from the US tariffs, the EU is currently conducting intensive talks with the US Trade Representative Robert Lighthizer. The EU has clearly stated that it wants to obtain an exemption from the US tariffs as a single trading bloc, and that it will not let the US exclude individual EU Member States. European Commissioner for Trade Cecilia Malmström is trying to obtain an EU-wide exemption by 23 March 2018, being the day on which the US tariffs will enter into force.

Amongst other efforts, the European Commission prepared an eight-page document that makes the case for an EU-wide exemption from the US tariffs, arguing that “the EU is not and will never be a low-cost producer flattening prices” in the US steel and aluminium markets. In this document, the European Commission also confirmed its willingness to work closely with the US to proactively enforce their rights in cases against key third countries. The European Commission is convinced that the root cause of the problem in the steel and aluminium sector is global overcapacity, which is rooted in the fact that a lot of steel and aluminium production takes place under massive state subsidies and under non-market conditions. According to the EU, this problem can only be addressed through cooperation.

If the EU is not exempted from the tariffs, the European Commission is considering a two-stage response in reaction to the US tariffs on imports of steel and aluminium, to offset the trade losses resulting from such tariffs. Malmström stated that a careful calibration of the EU countermeasures and a two-stage approach would guarantee their compatibility with its obligations under the World Trade Organization (WTO).

Under the two-stage plan, the EU would immediately place punitive tariffs on a long list of US products, containing – amongst others – textile products, cosmetics, agricultural products and industrial goods. The first-stage package, worth 2.83 billion EUR, would enter into force within 66 days after the US tariffs become active. The EU would then follow up about three years later with a second package of tariffs. On 15 March 2018, it was reported that the EU significantly increased the number of US products which would face extra tariffs in the second stage of the EU’s retaliatory action. The US products that the EU can target pursuant to the second list, which include bourbon, textile products, footwear and jewellery, have a combined export value of about 2.69 billion EUR per year. The lists were composed through internal consultations with Member State governments and industry representatives.

In addition to the two-stage plan, the EU plans to dispute the tariffs at the WTO in coordination with other trading partners, and is considering the introduction of its own safeguard measures to prevent dumping of steel and aluminium exports displaced from the US market. Regarding the launch of a WTO challenge against the US tariffs, it should be mentioned that such a case would only offer legal certainty and the possibility of redress after some years. With the US currently stalling the nominations of the new Members of the WTO Appellate Body, this could take even longer than usual.

The initiation of a safeguard investigation and the related imposition of safeguard measures therefore seems to be a more adequate response. Under WTO rules, a jurisdiction can impose temporary emergency tariffs and/or quotas to protect their domestic industry from a sudden, unforeseen and damaging surge in imports. Such safeguard measures must be applied to imports from all countries in a non-discriminatory manner. Thus, the measures would be applied to imports from Hong Kong and the Chinese mainland just as from any other non-EU country. The Commission has stated that it will closely monitor flows of steel and aluminium imports to detect a surge in supply. EU trade officials could then decide to impose provisional safeguard measures to guard against the threat of displaced trade.

On 7 and 14 March 2018, it was reported that the EU was ready to open a safeguard investigation on global steel. Provisional quotas, with duties attached, could come into force as soon as six to eight weeks after opening the safeguard investigation. The EU’s aluminium producers would have to wait longer for similar action, as investigators still need to gather solid evidence to warrant a safeguard investigation.

The provisional measures could last for a maximum of 200 days, with definitive measures following for a maximum of four years. This period can be extended by an additional four years.

If the safeguard measures materialise, all countries’ imports into the EU would be subject to the measures, but most likely with a tariff-free quota, meaning that the import duties would only apply after a certain volume of imports. Malmström has nevertheless publicly stated that the EU is in touch with its trading partners to ensure that fair traders are not penalised and will continue to have access to the European market.

Content provided by Picture: HKTDC Research
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