( Dr. A.S.Firoz is Chief  Economist at the Economic Research Unit of the
Joint Plant Committee and Convenor of Steel Exporters' Forum.)

WTO is no good for our steel

By Dr. A.S.Firoz

Global steel dialogues have not so far yielded the expected results - not because the efforts lacked heart. This is because countries suffering more from it seek solutions in global fora in the same beaten track. They continue to waste time on trying to come together when there is, in fact, no meeting ground. Global co-operation in steel trade needs a paradigm shift for it to succeed. Unfortunately, that is not happening. Despite the increasing number of talks these days upon the subject, the steel crisis is showing no signs of getting over.

If global talks have not been of any use, what about regional talks for the industry to get around the crisis it has been in for quite some time now? A round of talk between the steel makers in North and South America recently showed the way the global steel community should look at the problems of the industry worldwide. Recently, there were talks also between the Japanese and Korean governments, accompanied by the respective industry representatives, prior to the Shanghai round of talks, under the auspices of the OECD.

Why global talks in steel fail as a matter of routine is because all those participating in it seek solutions in the framework of the World Trade Organisation ( WTO ). It is in fact in the WTO wherein lies the root of most of the current problems.

In the early post-WTO years, there was some seriousness at least, to go by the rule book. It was a different matter that many national laws were not compatible with the newly framed WTO guidelines. There were fewer violations. But, today, one does not have to show evidence. Rampant violations of the provisions of the apex trade body have made a mockery of the system, especially when that comes to trade disputes like anti-dumping and subsidies. The developed countries, once accused of being brash, are getting slowly overtaken by brazen arbitrariness by the authorities in the developing countries in imposing trade measures. No one cares about the rules. It has been so - at least in steel. Therefore, looking for a solution within the WTO framework is itself nonsense.

Two, the global over-capacity that is at the heart of the steel industry's woes, cannot be solved by rule based systems of business ethics. Unethical practices and violation of rules are more common in a crisis situation. It is exactly the crises that one aims to overcome by rules and institutional interventions. The WTO does not discuss capacity reduction and cutbacks in investment. Developed countries, the USA and Canada in particular, (as happened recently in Shanghai at the OECD meet), want the developing countries (including some of the competing developed ones) to cut capacity to bring in a balance in the global demand and supply of steel. They want their industry to remain untouched!

Having a strong will to put an end to global steel disputes is not enough.

The efforts, small and big, made so far to bring in harmony and peace in international steel trade have met with no success so far. In fact, as the market continues to be in deep crisis, another round of anti-dumping and countervailing cases, originating in wel- known regions of the world, has made mockery of those who believe that peace talks can bring sense to the global steel community.

There are still those nations who believe that everything is alright with the World Trade Organisation (WTO) and that the steel crisis is the creation of the errant few who resort to unscrupulous practices of underpricing their exports and receiving subsidies from their governments to make competition difficult for those who swear by WTO ethics. They also blame it on the national governments in these countries for establishing, at the same time, high tariff or quantity-based protective barriers for the domestic industry.

Given the understanding that the WTO still matters, countries like the USA, Canada and those in the European Union (EU) have depended heavily on anti-dumping tools wherever possible to safeguard their industry. The relatively more liberal among them, the European Union, has but used these tools more carefully. The EU is sensing danger from the overprotective actions of the US. They are, therefore, looking for larger co-operation.

The difficulty is, every steel producing nation, when faced with strong import competition, falls back on to the WTO for a remedy. Beyond providing a set of honorable rules for dispute (naturally for creation of it rather than for settlement), the WTO does not seem to be helping the industry in its worst crisis.

The exporting nations decry those rules - yet do not propose anything more concrete as an alternative. They are unwilling to concede ground. In this, the global trade talks are losing sense and direction.

Against this, the North and the South American steel industries issued a joint document for discussions at the sixth Business Forum of the Americas.

The Forum that has representatives of both the government and the industry, was to finally put its views in the more formal discussions that were held in early April. What transpired in that meeting is not of greater importance than the fact that the Latin American Iron and Steel Institute and the American Iron and Steel Institute have come together to accept a common minimum programme for co-operation, rather than reflecting their differences over issues like anti-dumping.

According to reports of the American Metal Market, the joint statement had the following points:

• One, they believed that governments should recognise the steel industry as sensitive and important in the overall economy of the two regions.
• Two, they accepted that the small economies in the region needed more care and attention.
• Three, both the sides felt the need for an early and effective phase-out of tariff and non-tariff barriers. They agreed not to impose any new tariff or non-tariff barrier.
• Four, an important one, they accepted that none would bring in technical barriers to trade by introducing new technical standards. They emphasised on the need to harmonise existing technical standards among the concerned nations.
• Five, they agreed to have specific rules of origin for steel products.
• Six, they advocated harmonisation of the procedure for customs clearances.
• Seven, transparency was sought in government purchase policies.
• Eight, they felt the need for stronger, harmonised and transparent competition policies to be adopted by each country in the region.
• Nine, the obvious, they all agreed that trade laws in each country should be consistent with each other and should be in the framework of the WTO.

• One, a regional forum has raised issues so far taken only on a global body.
• Two, it was perhaps one of the first such efforts on the part of the industries in two major regions to come and put up a common policy for itself.
• Three, the talks raise one big question. Is there room for larger regional talks among steel producing and consuming nations? If so, can a country like India get into a regional talk to sort out some of its problems related to its steel industry?

The most important item in the agenda for the Japanese and the Koreans was to look for a common programme to counter rising protectionism in global steel trade. It was well expected as both the nations have very large stakes in the global steel mart as sellers. But they were also to discuss the process of restructuring of the steel industries in the two countries, especially involving electric furnace units. They knew that it is in this sector that both the nations have to cut or restructure capacity.

It is exactly where the regional co-operation should focus on. The North -South dialogues involving the Americas are good intentions under compelling situations where none is ready to concede any ground. Japan has already asked for a review of anti-dumping provisions in the WTO. Let other nations join in. Either correct the anti-dumping and countervailing provisions or do away with the WTO.

Steel disputes will change character but surely for the better. It is certainly more important to have regional co-operation and groups based on a solid understanding, not only for steel but also for any other products traded internationally. It is not also necessary for such groups to be geographical neighbours.

Let global trade recognise national interests and conflicts. Co-operation is needed only when there are conflicts. WTO has served the interests of a mighty few.

(The views expressed here are of the author.)