EU Has Given Up on Global Arrangement on Steel; Asks for TRQ Changes to Avoid Retaliation

The top trade negotiator for the EU, Executive Vice President Valdis Dombrovskis, said the EU's political leadership sees "no prospect to agree on a concept" for a global arrangement on steel, to box out unfairly traded steel and privilege steel made with less carbon intensity.

Dombrovskis, who spoke to the European Parliament's international trade committee on Nov. 28, said the EU tried hard to find compromises and keep negotiations going, but before the October deadline "it became clear that the US would not agree to permanently lift the 232 tariffs on EU steel and aluminium exports."

The press office of the Office of the U.S. Trade Representative did not respond to multiple requests for comment.

Dombrovskis said the U.S. and the EU agreed that the U.S. should improve the administration of tariff rate quotas on European steel and aluminum. According to a Reuters report, the EU would like the TRQs to apply across the entire EU, rather than be filled country-by-country, and to be administered for six months or a year, rather than quarterly. Even though more than 3 million metric tons of EU steel entered under the TRQ, importers of steel from the block still paid $264 million in tariffs, Reuters reported.

Dombrovskis said the degree to which the U.S. agrees to change the TRQs will "be part of a decision for both sides to continue to suspend tariffs." He also said: "It remains to be seen what exactly the US will be able to put on the table in this regard. This is now a matter of days."

He added: "I am personally engaging intensively with [Commerce] Secretary [Gina] Raimondo on this matter."

The Commerce Department also did not respond to a request for comment.

The EU hiked tariffs on U.S. whiskey and motorcycles by 25%, among other products, to try to bring political pressure on then-Majority Leader Mitch McConnell of Kentucky and then-Speaker Paul Ryan of Wisconsin, whose home states are leaders in those products.

U.S. Trade Representative Katherine Tai, speaking at the President's Export Council on Nov. 29, talked as if the global arrangement on sustainable trade in steel and aluminum is not dead.

She said they've been negotiating the global arrangement on steel "to convert essentially a national security set of restrictions to defend US steel and aluminum production and our jobs here, to modernize it essentially to address both fair trade and fair production, but also, importantly, clean production and clean trade. So the goal of this negotiation has been to create an arrangement that will, when accomplished, incentivize both fair trade in steel and aluminum and also clean trade and production."

She added: "When we do succeed on this, the idea is then to bring in more and more like-minded countries and then to create what will be a global arrangement.

"What we're trying to do is to create a new paradigm for trade in critical sectors and critically carbon intensive sectors that will create incentives for cleaner and cleaner production and fair production and trade. So I wanted to highlight that because I think that if you think about it as just a steel and aluminum exercise, you may be missing the import of what we're trying to do, which is to drive new incentives and new trade models."

The U.S. steel industry has said that TRQs must remain in place as negotiations on a global arrangement on steel continue. The EU's trade group for steelmakers, Eurofer, bemoaned the foundering of negotiations.

"An ambitious international binding agreement tackling the existential challenges the steel industry is facing worldwide should not become the collateral damage of different views across the Atlantic on the approach to solve the US Section 232 issue while we share the same values. On the contrary, an ambitious Global Arrangement will naturally include a long lasting and solid solution to unilateral, distortive U.S. tariffs on EU steel under Section 232," said Axel Eggert, director general of the European Steel Association.

Dombrovskis also told parliamentarians that he hopes the EU and the U.S. can find a compromise soon, so that a critical minerals agreement can be completed by the next Trade and Technology Council meeting. He complained that the U.S. "demands were far more far-reaching than those in their critical minerals agreement with Japan," but said the two sides have made good progress.

A critical minerals agreement with the EU would allow critical minerals mined, processed or recycled in the EU to count for consumer tax credits for electric vehicles under the U.S. Inflation Reduction Act.