Are U.S. steel tariffs backfiring?

Dünya Executive - - BUSINESS - IBRAHIM EKINCI

Turkey has been seriously affected by the U.S. decision to launch a “trade war” on steel and aluminum imports. Turkey’s exports to the U.S. in these products, worth $1.2 billion, dropped by 48.3 percent to 455,000 tonnes in the first four months of the year compared to the same period last year. But at the same time, the U.S. decision to impose a 25 percent tax for imports of steel is beginning to produce domestic consequenc­es. Prices in the domestic market have risen significan­tly, making exports to the U.S. “profitable” despite the tax rate reaching 34 percent for Turkish companies. Let us explain why.

High prices make exports poss ble

An important developmen­t has allowed Turkish companies to resume exporting to the U.S. The United States was already implementi­ng anti-dumping laws against Turkey in many iron and steel products. On top of that, it imposed the 25 percent tariff, thus raising the effective tax to around 35 percent.

How can exports be possible and profitable under these conditions? Adnan Aslan, chairman of the Steel Exporters’ Associatio­n, has the answer.

“Because the prices on the U.S. domestic market have been so high, we were able to export hot flat steel in spite of the 25 percent tax,” he said. “The same applies for steel pipe. Our companies have come to a stage to be able to export. The price increase meets the tax. Countries imposed with quotas are about to fill their quotas. Thus, despite the 25 percent tax, Turkey will be able to export flat steel and pipes. It is also possible for bar-steel.”

Still, the drop in exports is a concern, Aslan said. “The most important reason why the export of our products has fallen in quantity is due to the impact of Section 232 of the ‘National Security Law’ in the U.S. In the first four months of 2018, our steel exports to the U.S. fell by 48.3 percent on an annual basis. As of April, there was a record drop of 68.1 percent on a quantity basis. We are carrying out the necessary studies in order to be exempt from the Section 232 measures. This is very important for our steel industry, which exports under the rules of the World Trade Organizati­on, to continue mutual, fair trade with the United States.”

Steel exporters hire a law firm

The measures that Aslan mentioned have reached an important stage. The government is continuing its initiative­s with the U.S. government. However, according to the informatio­n we received, there is difficulty in finding an interlocut­or in the U.S. Normally, this should be the Department of Commerce but they keep passing the buck to elsewhere, saying: “The White House took the decision, they have the authority.” When the White House is approached, they refer back to the Commerce Department.

Meanwhile, individual companies also have their own lobbying initiative­s. You might have read in DUNYA Executive’s previous issue that Borusan hired former New York Governor George Pataki for lobbying activities. The lobbying operation will be centralize­d and run by the Steel Exporters’ Associatio­n. Aslan said that they made an agreement with Arent Fox, a major U.S. law firm, that Attorney Matthew Nolan will deal with the issue.

“We requested payment support from our ministry for attorney services,” Aslan said. “It was not accepted. We wrote a second petition. However, even if we get a negative reply once again, we will continue our efforts by covering the expenses together as an industry. We agreed on 300,000 euros and the work has begun. Lawyers will make a visit here this week to hold meetings with the union and the government.”

According to the U.S. Department of Commerce and Internatio­nal Trade, the U.S. is the world’s largest steel importer with 34.6 million tonnes of steel imported last year. Canada is its biggest supplier at 5.8 million tonnes. Steel imported from Turkey was 6 percent of the total, or $1.2 billion.

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