White House Section 201 Steel Remedy Decision

Real Audio of Briefing

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MODERATOR: Good evening, ladies and gentlemen. Today, as a part of a three-part administration strategy on steel, the president announced Section 201 steel remedy decision.

To brief us on this important progress toward the steel policy, we're fortunate in having Ambassador Peter Allgeier, who is the deputy U.S. trade representative. We have also the undersecretary of Commerce for International Trade Administration, Mr. Grant Aldonas, and the general counsel of the USTR office, Mr. Peter Davidson.

Because of the hour and the pressure these gentlemen have been under today, two of our guests are probably going to have to leave before the briefing is over, so you'll excuse them in advance.

Ambassador Allgeier will begin with an opening statement, and after that we'll take your questions. As usual, could I ask you to wait for the microphone and ask you to introduce yourself by name and organization? Thank you very much.

Thank you, gentlemen.

MR. ALLGEIER: Thank you, Peter. As Peter said, the president has had a three-pronged approach to restoring market forces in the global steel market, in the global steel industry. The first part has been to seek a reduction in excess global capacity, and Undersecretary Aldonas has led that effort in the OECD.

Also, the second part has been and is continuing to be to seek discipline on subsidies in this area and other governmental intervention that distorts the market. And the third element was to ask the ITC to investigate whether imports have been a substantial cause of injury to our industry.

You know what the results were from the ITC, and the president today made his decision on what remedies should be put into place. He decided on a program of temporary -- that is, three-year -- safeguard measures, using temporarily increased tariffs and a quota, with a higher tariff above the quota in certain products.

And we can get into the details of those to the extent that you wish, but I'd like to emphasize just two things. One is this is a very balanced decision. It has had to balance the interests of our steel industry and the various segments within that industry, the industry's workers, retirees, the families and the communities, the industries in the United States that use steel, and, of course, our trading partners.

And in that regard, the second point that I'd like to emphasize is that the measures that the president decided upon today are scrupulously consistent with our international obligations in the World Trade Organization and in our other international obligations, such as the free trade areas that we have, in particular the NAFTA.

So that is the background on the decision today, and any of us would be happy to take questions. Or Grant, would you like to say anything?

MR. ALDONAS: No, I'm fine. That's a good summary.

MODERATOR: Okay, let's start over here with our friends from Turkey.

Q (Name and affiliation inaudible.) One basic and simple question: Is Turkey in list of countries exempt from the new tariffs?

MR. ALDONAS: If I'm not mistaken, it is in most product categories, particularly the flat products, which is the largest share of products covered. But I can't say that in every one of the product categories that Turkey is exempt. I don't know that for certain. I think, in the main, it is.

MODERATOR: Andrei.

Q Andrei Sitov (ph) from Russia, Itar-TASS News Agency. Gentlemen, does this mean that for the next three years the United States will be in a trade war with Russia and the other countries hit by the sanctions?

MR. ALDONAS: No. As a practical matter, what we've done is consistent with our WTO obligations with respect to our trading partners in the WTO. Has the reaction been sharp, and may we be challenged? Yes, that's a possibility. I agree with Peter. I think we've done it consistently.

With respect to Russia in particular, most of our trade is covered by a separate set of agreements at this juncture, and so the products that Russia ships to us in any considerable quantity right now is slab. That share is covered by the tariff rate quota arrangement, which would mean for the amount that Russia currently ships into the United States, it would come in duty-free. It would not be covered by the relief.

Q Just to make sure I understand, do the previous agreements remain in force now?

MR. ALDONAS: Sure, absolutely. There's nothing about the president's determination that abrogated or ended those or terminated those agreements on the part of the United States.

MODERATOR: (Inaudible) -- from Brazil.

Q (Inaudible) -- Sao Paulo, Brazil. I have two questions. First, what is the criteria for distribution of the quota for exporters on the slab particularly that affects Brazil? Second, Ambassador Zoellick said this afternoon that in the case of Brazil, exemptions -- developing-country clauses will end up exempting some finished product, some categories.

Now, most Brazilian exports of finished steel to the United States have been banned, basically, because of anti-dumping and anti- subsidy actions that Brazil considers pretty questionable. Those exclusions under this decision by President Bush doesn't change the previous decisions, right? So if we are excluded, we remain excluded, right?

MR. ALDONAS: It doesn't affect exactly the anti- dumping/countervailing duties decisions previously. With the case of Brazil, where you have such a significant amount of slab being imported into the United States, Brazil will be provided with nearly a 50 percent share of import of the slab market based on the year 2001 allocation period.

I should say also that Russia will be given about a quarter of the import share of the slab allocation because of the allocation formula.

MR. DAVIDSON: I think it's fairly important to add, Peter, that that historical share would cover the existing exports to the United States because it's based on the 2000 period, when there were record slab imports in the United States.

Q Follow-up? Does the decision provide for an increase of the quota for slab every year? How much --

MR. ALDONAS (?): Five hundred thousand short-ton increase per year. And that will be divided -- reallocated among (them?).

MODERATOR: Greg.

Q (Off mike.)

MODERATOR: Is that mike on?

Q (Inaudible) -- South China Morning Post, Hong Kong. I'd like to talk about perceptions for a second. You say it's a very balanced decision. Are you worried about the long-term difficulties to the U.S. reputation as a world leader in free trade, particularly given statements that Mr. Bush made during his election, especially with regard to China as well in trying to lead China into a low- tariff regime? Thanks.

MR. ALLGEIER: Well, I think if someone looks at the overall record, it's very clear that this is a free-trade administration, starting with the launching of the round in Doha. You mentioned China, bringing China and Taiwan into the WTO; the Free Trade Area of the Americas.

Free trade does not mean that countries should be free to subsidize and to intervene in ways that distort the market. And so, as I said at the beginning, the objective of the president and the administration is to restore market forces to this very important international market. And as far as long-term, this is, as I said, a short-term measure consistent with the WTO. And so I think that as countries look at this, they'll realize that we are playing by the rules and we'll continue to do that.

MR. ALDONAS: It might be helpful to add just a little context to that. You know, one of the things with about 39 countries in the OECD talks, we made the point that you have a 200-million-ton excess capacity problem worldwide. If you took the 124-million-ton U.S. industry out of that, you would still have an 80-million-ton excess capacity problem, and prices worldwide would still be at historic lows.

The point that the president made was we need to ensure that we're driving the global system in a way that gets us out of the cycle of governments intervening to support their industry and countries responding to the trade account.

I will leave to you to judge. We got about 120 commitments with respect to 120 million tons, a fair share of it which was U.S., in the OECD talks. That left 80 million tons of excess capacity. Is that enough? Obviously not. And I think that the judgment made here is we have to do something to create the breathing space for the industry. We'll continue to press ahead in those talks, and the president has left himself room to address changes in market conditions as they go forward.

But as far as we're concerned, we weren't going to leave the United States in a position where workers in the United States would bear an unfair share of the burden of adjustment to this global excess capacity problem, which has not been solely ours in the making.

Certainly in the (Paris?) talks, all of the governments agreed that governments worldwide have contributed to this problem. We need to find a way out of this mess. And we haven't gotten the results we would like. We'll keep pushing in that direction.

MR. DAVIDSON: I'd like to emphasize one thing that Mr. Aldonas just mentioned, and that is, the president has reserved the discretion to modify the remedy for various purposes. And I'm sure that the president is going to be looking very closely at what happens domestically in terms of the industry's moves to restructure, as well as what happens internationally.

Also, the remedy goes for three years and a day, and so there will also be a midterm review of the relief upon which the president can also review some of the factors that are set forth in U.S. law to determine if the remedy is meeting its purposes.

MODERATOR: (Inaudible.)

Q (Inaudible) -- Japanese daily newspaper. I'm just wondering if any of you have any -- (inaudible) -- how much it's going to decrease the steel import next three years.

MR. ALLGEIER: Well, we would have to -- part of that would have to be a projection of what's going to happen to our economy. And that would have an impact, obviously, on imports of all products, including steel.

MODERATOR: The gentleman with a purple tie over here.

Q (Inaudible.) With this decision, some countries have a heavier burden and some countries have a softer burden. And, I mean, the heavier burden goes to some Asian countries -- China, Japan and South Korea. Some softer burden goes to European countries. Don't you think the president takes a -- (inaudible) -- policy?

And secondly, President Bush is basically advocate of tax reductions. And economically, tax and tariffs have same impact to the markets. So I think President Bush takes some kind of a political consideration rather than economic consideration.

MR. DAVIDSON: I can maybe try the first part of that answer. There are certain categories of countries that international rules allow us to treat differently. Those are our free-trade-agreement partners. Mexico and Canada can be exempted. And, in fact, if they are not, we would give them compensation or they would be able to retaliate due to the impact on their exports.

Secondly, we are -- international rules require us to exclude developing countries that do not reach a certain threshold of percentage of imports in the United States. And so we have excluded those developing countries. Those are done by product line. But the vast majority of products from the developing world are excluded entirely from the remedy.

In terms of other efforts to construct winners or losers throughout, there was absolutely no effort to do that. As Ambassador Allgeier mentioned, we've scrupulously followed the rules in terms of applying the remedies, and we did them across the board equally. And if there is some impact greater than others, that's a result of application of the rules and certainly no picking and choosing.

MR. ALDONAS: Also, I think the answer is more blunt. Your premise is wrong. It's not as if China and Japan or Korea had been singled out relative to Europe. Imports of steel from either Europe or Japan will be subject to the same duties.

There's no heavier burden on Asian countries than there is on European countries. If anything, there is a lighter burden on developing countries because that's what the WTO rules require. So the poorer countries, which export de minimis amounts -- you know, Korea is a significant player in the U.S. market, as is Japan.

The poorer countries, like a South Africa, an Argentina, which export very little to the United States and are developing economies, are exempt under the WTO rules. That's the only significant exclusion, apart from our free-trade partners.

MODERATOR: The gentleman here in the brown suit.

 Q (Inaudible) -- South Korea. I want to follow his question. There are four countries that are excluded in this decision -- Israel -- (inaudible) -- Mexico and Canada, who have free-trade agreement with the U.S. If I understand the World Trade Organization correctly, there must be a parallelism over the (consistency?) between enforcement and investigation. Could you elaborate on this matter about the criteria of the fairness?

 MR. ALDONAS: Sure. But let me try and tease out two things. One is, you understand Article 24 of the GATT 1994, part of the WTO, allows us to treat our free-trade-agreement partners differently for these purposes. The rules that apply in this instance with respect to safeguards are procedural.

 So the point you're saying is that under this agreement, was there an attempt by the ITC to separately investigate the issue of the effect of exports to the United States, holding aside Canada and Mexico, Jordan and Israel, so that the remedy that's been provided here matches up with the investigation?

And the USTR specifically requested additional information from the ITC to address those specific points in January, so that there was a matching between the investigation by the ITC with evidence behind it and the eventual remedy that's come out.

MODERATOR: Mr. Ikeda (ph) and then we'll go over there.

Q Mr. Ikeda (ph). I'm an AP reporter for Latin America. Would you please single out the countries in Latin America that are not covered by President Bush's decision, besides Mexico?

MR. ALLGEIER: Well, none of the countries are covered, with the exception of Brazil, because all of the other countries fall under the developing-country exclusion rule of the WTO that has already been mentioned.

MR. DAVIDSON: Peter, with the possible exception of product of rebar for Venezuela. That's the only exception I could find.

MR. ALDONAS: Yeah, that's probably worth clarifying, that the exclusions with respect to the developing countries vary by product. And the reason they vary by product is because we're simply applying the WTO rules. If you export less than 3 percent and the group as a whole exports less than 9 percent of a particular product category, the country is out. So that can vary. But we're simply applying the WTO rules in every instance for these different product categories.

Q Michael Baxisch (ph) from -- (inaudible) -- Germany. What about the ripple effects on the steel-importing industry in this country? According to a study of this industry, around 75,000 jobs will be destroyed by tariffs, whereas only around 9,000 jobs will be saved. And how do you evaluate the fact that the overall imports to the U.S. have decreased by 21 percent in 2001 compared to 2000?

MR. ALDONAS: Well, let me tackle the last question first. There seems to be this sense that somehow, over the period of investigation, that imports tailed off in some dramatic fashion. What that ignores, of course, is the strong surge in imports that we had in the midst of the Asian financial crisis and following that, up until the point where the U.S. economy started to slow down.

Traditionally, when the U.S. economy slows down, imports fall out of the market first. And the reason is that most of those exports aren't under long-term supply contracts with big users like the automobile industry or the (white goods?) industry. So as the economy slows, you see a more precipitous decline in the import levels than you do in terms of overall demand.

Now, having said that, the fact of the matter is that we're still seeing very soft prices that are a result of very significant historic levels of imports even after the drop in imports in 2001. They were up again -- imports were up again in January.

MR. ALLGEIER: I think, on the other point, the study -- I mean, that is one study. And, believe me, we have seen numerous, numerous studies in the last few months that have been submitted by various interests. And as many studies as have been submitted, there are different outcomes. So that's one particular view, but it's not a consensus view.

Q (Off mike.)

MR. ALDONAS: Well, there's no doubt that you're going to be creating a wedge between domestic international prices of some sort with a tariff. And in the consuming industries, what you may find is that there's a shift overseas out of basic steel and into steel- consuming commodities, and we'll see more imports of that into the marketplace. That's a possibility.

But you have to appreciate -- I think this is one of those instances where the U.S. steel industry has 27 companies in bankruptcy. You have historic levels of imports, even if they've declined recently. It's difficult to think of an instance where a safeguard would be more applicable than in the current state of the U.S. steel industry.

And there are times, in the conduct of trade policy, when, faced with a situation which I think the president has been faced with, that you have to make hard choices. Ultimately there's (impact?) with working men and women of the United States, and part of the question is whether you're going to let other countries export a share of their own employment to the United States when you know that there's interventions in the marketplace abroad.

A good example would be Europe, for example, where it's clear that there's been very significant cautionary notes, expressions of concern from our European colleagues, that suggest that somehow the European market is free of any sort of distortion or free of any kind of restraint, when, in fact, there's a double monitoring mechanism on all exports to Europe from the (East?).

The practical effect of that is to restrain competition in the European marketplace. That isn't materially different than what we're doing here. In Mexico recently, the Mexicans raised tariffs on steel up to 35 percent for precisely the same reason. We're all grappling with the same problem, which is a problem of global excess capacity.

The right route out of that is definitely to do it at a multilateral level. Have we achieved enough there to say you shouldn't give the U.S. industry breathing space when it's consistent with the WTO rules? No. Can we? Yes. But we're not there yet.

MODERATOR: (Inaudible.)

Q Italian News Agency, ANSA -- (inaudible). Focusing on the European Union, which are the EU countries affected or more affected by those measures?

MR. ALDONAS: They're all affected uniformly in terms of the EU. Steel coming in from the EU will, regardless of country, be affected by the relief.

MODERATOR: The gentleman in the black jacket over here.

Q (Inaudible) -- Korea Economic Daily. I know more than 30 U.S. steel companies went bankrupt during recent three to four years. Do you think the import surge is main factor for that? Or what do you think about the bankruptcy there? Import surge was the main factor or main reason for that?

And second -- okay, second question is, how much are you concerned about the response or reaction from trading partners? Even before you announced -- (inaudible) -- they already won -- (inaudible) -- retaliation against your country.

MR. ALDONAS: We certainly took that into account. The president obviously took that into account. And there is balance in this decision. Certainly the poorer countries that export very little to the United States (are out?) under the WTO rules.

We took into account the fact that the North American steel industry, Mexico and Canada included, are adjusting to the North American market for automobiles and (white goods?) and downstream products, which is a process that frankly we didn't want to stop or don't want to prevent.

Now, having said that, I need to be very, very clear about this. We are living with a legacy of 50 years of state intervention in the marketplace. Fifteen years ago, 75 percent of the steel industry was still state-owned. Today it's still 25 percent is state-owned. Under those circumstances, there's no doubt that there's government intervention in the marketplace.

And what we said consistently, for example, in the OECD talks is we're happy to try and break out of this cycle of intervening on our trade account because we see continuing support for an industry abroad that results in exports to our markets. We're not there yet, frankly.

It's going to take a real effort, both in the OECD, on the excess capacity side, as well as negotiating rules, probably in the WTO, that would ensure that we don't fall into this cycle again. But that's what it's going to take to solve the problem globally in terms of the steel industry.

MR. DAVIDSON: I would like to add one thought to that as well, and that is, we care very much about what our trading partners think of this. And Grant had mentioned the OECD talks and the subsidization talks as one aspect of that.

Another is that we sat down and listened to and consulted with anyone who wanted to come in and talk to us about this 201 investigation. And we were meticulous about that, and we will continue to consult and meet with all of our trading partners, consistent with both our international obligations but also our desire to function as a part of the international trading community.

Q (Inaudible.) Do you have certain list of exempted countries under the WTO rules as developing countries?

MR. ALDONAS: We don't. I mean, we know who's covered. We know everybody else is out.

Q Because Washington Post reports that Turkey, Argentina and Thailand -- (inaudible).

MR. ALDONAS: Well, the only thing -- since those exemptions are based on the WTO rules for developing countries, they vary by product. And what I can't say off the top of my head is exactly where Turkey falls in each product area.

Q (Inaudible.)

MODERATOR: Let's -- you've had a chance. We only have a few more minutes. Could we have questions from people that haven't asked them? Okay. Let's go back to Turkey, and then we have a new question in back.

Q How many categories of steel -- how many types of steel --

MR. ALDONAS: Ten.

Q Ten.

MODERATOR: Let's go to the lady there.

Q (Inaudible.) I would like to know if you could elaborate a little bit on what Mr. Zoellick said today earlier that the Brazilian exports wouldn't be affected by this measure -- (inaudible) -- 98 percent of the exports.

MR. DAVIDSON: I think what Ambassador Zoellick was saying is that -- and this is the question we're addressing here -- is the importance of slab exports to Brazil within the United States is the overwhelming share of the export. And Brazil is going to be able to command a 51 percent, I believe, share of the import market for slab. And so I think his point was that there should be no effect in that important product category for Brazil.

MODERATOR: Last question. Andrei.

Q I understand that you cannot speak for individual countries. But given the criteria that you mentioned, can we safely assume that aside from Russia and the Ukraine, other CIS countries, former Soviet countries, would be excluded for all or maybe most categories?

MR. ALDONAS: I think that's accurate. We can get back to you with specifics. For major products, I believe that's right.

Q All right. And second, I'm sorry, but I still did not understand. You said that the previous agreements are still in effect. The previous agreements had quotas that Russia was entitled to for specific product categories. So does that mean that Russia still is entitled to sell those categories of product to the same amount?

MR. ALDONAS: Yes, subject to the relief. Now, for example, there's a quota under the comprehensive agreement that covers slab exports to the United States. Those slab exports will be well within the historical market share of Russia exporting into the United States.

What that implies is that there will be no tariffs on Russian slab exports, based on the historical market share of that amount allowed under the comprehensive agreement. In other areas, whatever can come in would be subject to duty, as would any other export from Russia, with or without the agreement.

My only point is saying that there's nothing in this decision that affects those agreements. There was no action by the United States to terminate or modify those agreements. This is a decision about all steel exports coming into the United States, and what steel comes from Russia will or will not be affected by the president's remedy, based on how it applies in a given product category. If it's slab, my guess is everything that you can currently export on the comprehensive agreement will come in duty-free.

Q (Off mike.)

MR. ALDONAS: If it's above the historical share of slab, yes.

Q (Off mike.)

MR. ALDONAS: Oh, hot roll? Well, yes, exactly.

MODERATOR: Well, Ambassador Allgeier, Mr. Aldonas, Mr. Davidson. Ladies and gentlemen, thank you very much for your interest, too. It's late. And this obviously is an important topic, and I'm glad we could do this.

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