WTO Slams U.S. Safeguards Decision
 
April 22, 2003
 

On Wednesday, March 26, the World Trade Organization (WTO) issued a preliminary ruling that the tariffs imposed on imported steel under section 201 of the U.S. trade laws violate WTO rules. The section 201 steel program imposed tariffs ranging from eight to 30 percent on certain imported steel products. These rates will decline each year until they expire on March 6, 2005. The domestic industry initiated the section 201 action to protect itself from international competition. Since the U.S. government imposed section 201 sanctions in March 2002, the U.S. industry has been able to begin a process of consolidation and reorganization.

Members of the U.S. Congress were quick to criticize the WTO’s ruling by charging that such decisions could have a negative impact on the member countries’ confidence in the organization’s procedures, particularly those concerning its dispute settlement process. Many countries, including members of the WTO, currently have similar trade laws, known as ‘safeguards.’ The Bush Administration is reviewing the decision and plans to appeal the ruling. If the Administration does appeal, a final decision could be delayed until sometime next fall.

Earlier in March, the U.S. Department of Commerce (USDOC) and the Office of the U.S. Trade Representative (USTR) issued a new list of 295 products to be excluded from the steel tariff program. In 2002, the administration excluded a total of 727 products after providing interested parties the opportunity to comment on whether specific products should be excluded. The total products excluded amounted to almost one-fourth of the tonnage of steel initially included by the order. In the latest round of exclusions, 661 requests were made and 295 were granted, of which 208 received no objection. It should be noted that the United States is not required by its own laws, nor those of the WTO, to provide for such exclusions. In total, the administration has excluded 1,022 products from the steel tariff program. International trade attorneys of Holland & Knight LLP were successful in obtaining 10 such exclusions on certain steel products for interested clients.

Currently, the U.S. International Trade Commission (USITC) is in the process of reviewing the program’s efficacy, as well as its impact on the domestic industry. Under the U.S. trade laws, tariffs imposed under section 201 must undergo a review process at the midpoint of their duration. The USITC will conduct public hearings in July to hear from interested parties as a part of the midpoint review.

In a victory for steel consumers, the USITC also will examine the impact of the safeguards on domestic-consuming industries under a separate investigation requested by the U.S. House of Representatives Ways and Means Committee Chairman Bill Thomas (R–CA). Domestic steel consumers, which, if measured by the number of employees are much larger than the producers, have claimed that their operations have been negatively impacted by the increase in steel prices, causing plant closures and shuttering of operations.

After the USITC and other U.S. agencies complete their review of the steel section 201 tariff program, President Bush will determine whether it should remain in effect. The President faces a tough decision given the numerous and powerful political influences on both sides of the issue.