US steel pol­icy may trig­ger a global trade con­flict

China Daily (Hong Kong) - - VIEWS -

As the White House seeks to turn steel im­ports into a na­tional se­cu­rity mat­ter, the is­sue is alien­at­ing not only China but also the United States’ NATO al­lies. “They’re dump­ing steel and de­stroy­ing our steel in­dus­try, they’ve been do­ing it for decades, and I’m stop­ping it. It’ ll stop,” US Pres­i­dent Donald Trump de­clared dur­ing a re­cent flight from the US to France. “There are two ways: quo­tas and tar­iffs. Maybe I’ ll do both,” he added just days be­fore his ad­min­is­tra­tion’s first Sino-US Diplo­matic and Se­cu­rity Di­a­logue.

Only days af­ter China’s am­bas­sador to the US Cui Tiankai warned Wash­ing­ton on “trou­bling de­vel­op­ments” that could de­rail the bi­lat­eral re­la­tion­ship, US Com­merce Sec­re­tary Wil­bur Ross said he would present Trump a range of op­tions to re­strict steel im­ports on na­tional se­cu­rity grounds — even as Europe’s NATO lead­ers were al­ready lob­by­ing against the White House’s pos­si­ble move.

Af­ter the meet­ing be­tween Pres­i­dent Xi Jin­ping and Trump in early April, China and the US an­nounced a 100-Day Ac­tion Plan to im­prove strained trade ties and boost co­op­er­a­tion be­tween the two coun­tries. “This may be am­bi­tious, but it’s a big sea change in the pace of dis­cus­sions,” Ross said at the time.

Barely two weeks later, Trump is­sued a pres­i­den­tial me­moran­dum di­rect­ing Ross to in­ves­ti­gate the ef­fects of steel im­ports on na­tional se­cu­rity on the ba­sis of the Trade Ex­pan­sion Act of 1962. If Ross de­ter­mines steel “is be­ing im­ported into the US in such quan­ti­ties or un­der such cir­cum­stances as to threaten to im­pair na­tional se­cu­rity”, Trump is au­tho­rized to take ac­tion “to ad­just the im­ports of the ar­ti­cle and its de­riv­a­tives so that such im­ports will not threaten to im­pair na­tional se­cu­rity”.

It was such ac­tions that Trump al­luded to in his re­cent state­ment, in­clud­ing im­pos­ing im­port quo­tas, li­cense fees on im­ported goods and ne­go­ti­at­ing more re­stric­tive trade agree­ments.

Since 2000, the global steel mar­ket has changed dra­mat­i­cally. Some two decades ago, world crude steel pro­duc­tion was still about 850 mil­lion met­ric tons a year. While North Amer­ica, Europe and Ja­pan (read the G7) ac­counted for more than half of the to­tal, China’s share was only 15 per­cent.

In the past, ad­vanced economies were the key pro­duc­ers. To­day, emerg­ing economies spear­headed by China ac­count for 70 per­cent of global steel pro­duc­tion.

That’s the real rea­son for in­creas­ing steel pro­tec­tion­ism in the US and the Euro­pean Union in the past few years. But Trump’s lat­est ef­fort is split­ting even the transat­lantic front.

With steel im­ports sud­denly be­com­ing an is­sue of “na­tional se­cu­rity”, US De­fense Sec­re­tary James Mat­tis has been dragged into the de­ba­cle. By mid-June, Europe’s NATO lead­ers joined in as well. They launched an ex­tra­or­di­nary lob­by­ing cam­paign against an an­tic­i­pated US crack­down on steel im­ports, which, they ar­gued, would hit US al­lies more than China. Con­se­quently, Mat­tis — not Ross — has been hear­ing the cases of ap­pre­hen­sive Ger­man and Dutch NATO lead­ers and has passed on their con­cerns to the White House.

Dur­ing Ge­orge W. Bush’s pres­i­dency, the transat­lantic axis al­most fell apart be­cause of a deep di­vide in se­cu­rity pol­icy. Now, the same axis is be­ing strained to the hilt by deep di­vi­sions in eco­nomic, trade, cli­mate and steel (read se­cu­rity) poli­cies.

Wash­ing­ton’s NATO al­lies do not buy the na­tional se­cu­rity ar­gu­ment. In Brus­sels, the mood is grow­ing for re­tal­i­a­tion if the Trump ad­min­is­tra­tion were to walk the talk.

Ross seemed to be push­ing for a trade war over steel in a closed­door meet­ing with Se­nate Fi­nance Com­mit­tee mem­bers, but he has not put a time frame on his re­view’s re­lease. Of­fi­cially, he has 270 days to sub­mit a re­port to Trump — which trans­lates to any­time be­tween soon and late fall. What next? If Ross finds that steel im­ports threaten to im­pair na­tional se­cu­rity, Trump must de­ter­mine within three months whether he con­curs with the com­merce sec­re­tary’s find­ings, and what ac­tions should be taken.

In prac­tice, the White House’s cur­rent goal is to ramp up “Amer­ica First” pres­sure on the eve of Trump’s first Sino-US di­a­logue. The­o­ret­i­cally, Ross and Trump can de­fer dif­fi­cult deci- sions on steel only un­til early spring 2018.

How­ever, a Pan­dora’s box has now been opened and an ad­verse de­ci­sion could not just de­rail Sino-US bi­lat­eral re­la­tions, but alien­ate Wash­ing­ton’s NATO part­ners and un­der­mine much of past eco­nomic progress world­wide.

The author is the founder of Dif­fer­ence Group and has served as re­search di­rec­tor at the In­dia, China and Amer­ica In­sti­tute (USA) and vis­it­ing fel­low at the Shang­hai In­sti­tutes for In­ter­na­tional Stud­ies (China) and the EU Cen­tre (Sin­ga­pore).


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