USTR Says Administration Supports Reform of AD/CVD, Anti-Circumvention Laws

U.S. Trade Representative Katherine Tai said that the administration is "very supportive" of Leveling the Playing Field Act 2.0, a bipartisan bill from Ohio's senators that would clarify how dumping calculations are made, would provide for expedited successive investigations when there is an import surge from a new country on a product subject to a trade remedy order, and would address extraterritorial subsidies (see 2104160037)

Tai, who was answering questions from the American Iron and Steel Institute CEO at the joint annual conference of AISI and the Steel Manufacturers Association, also said explicitly that extraterritorial subsidies need to be part of the calculations for trade remedies. When AISI's Kevin Dempsey asked if there needs to be a change in law to address how cross-border investment and transnational subsidies can distort markets, she said simply: "Yes."

The audience of steel company executives laughed. The atmosphere was warm between Tai and the steel industry, as she received a standing ovation both before and after her remarks, and she said, "It's good to be among friends."

Tai's appearance Nov. 2 came just two days after the U.S. announced new tariff rate quotas on European steel and a rule that the steel from the European Union, in order to qualify for the quota, must be wholly a product of the EU, or "melted and poured" within its boundaries (see 2111010039).

That announcement also said that the EU and the U.S. will continue to discuss how to address global overcapacity in steel, and how to come up with a common methodology to measure the embedded carbon in steel products, with an eye to excluding dirty steel from their home markets.

Tai said the key with both the EU and other allies who might wish to either escape the 25% tariff on their exported steel or change the terms of their quotas is that Japan or the United Kingdom or South Korea need to have "the courage to take effective measures at the borders" to keep out steel that is produced with trade-distorting subsidies. Tai said that other countries that share American values and that are affected by China's uneconomic steel production need to be "locking arms in taking effective measures at our border." Tai said that settling these trade irritants rebuilds trust between the U.S. and its allies, which sets the stage for taking on challenges together.

Over the weekend, the Commerce Department said that discussions are underway with Japan and the United Kingdom on how to resolve Section 232 tariffs on their countries. Tai said those aren't the only countries that want to be part of this future negotiation on carbon intensity and metal production. "There's so much interest," she said. "If we were setting up shop, and had a physical place, the line would be out the door and around the block."

Before Tai's speech, top steel executives talked to reporters about the EU agreement, and the negotiations to come on overcapacity and on carbon intensity of steel. They, however, use a different definition of overcapacity than the one Tai does. She says overcapacity is when governments spend money to support steel production that could not otherwise be profitable, and produce more than the home market needs. The Steel Manufacturers Association defines overcapacity as any production that is more than what the home market needs, and therefore, they say, Europe is part of the problem. Japan and South Korea would be, too, by this standard.

However, Steel Dynamics CEO Mark Millett, during that same press event, said that Europe is a modest player in America's steel imports, accounting for just 15% of imports. He said a bigger concern he has is that 55% of imports now are not subject to the 25% tariff, either because they're coming from Canada or Mexico, or because they're covered by exclusions, or because they're under the tariff rate quota for Brazil or South Korea.

Dempsey said that the fact that the EU and the U.S. are going to negotiate how to create a measure for steel that takes into account carbon intensity will be positive for the U.S. steel industry, because of its relatively low carbon footprint compared with other countries' production.

Millett said that the industry does not want the U.S. to implement a carbon tax on it so that the EU and the U.S. approaches to linking trade to climate change are harmonized. Since U.S. steel is already cleaner, he said, "Why be punitive on us?"

International Trade Today asked how steel companies could calculate their carbon footprints when some of the pollution happens at vendors -- for instance, when a mill imports a semi-finished steel product, for example, from Brazil.

Cleveland Cliffs CEO Lourenco Goncalves said his company does not import Brazilian slabs, but said that this identifies one of the problems with carbon accounting in the industry. He said as currently measured, the steel industry measures its CO2 consumption by looking at its fuel consumption and purchased electricity, which are called Scope 1 and Scope 2, but not at purchased goods or the transportation of those goods, which is considered Scope 3.

"For some strange reason, we don’t account for Scope 3; just Scope 1 and Scope 2," he said, adding that inputs' carbon costs need to be measured. "Otherwise, we are kidding ourselves and gaming the system is very easy and slabs is one way for doing that. We need to continue to educate the administration about these things. We are paying a lot of attention."