US-EU steel deal may not remove all barriers, says Dombrovskis

26 July 2021

11:30

Any resolution to the EU-US Trump-era row over steel tariffs may not remove all barriers placed on the sector, according to the bloc's trade chief Valdis Dombrovskis.

An engineer watches hot molten forged steel rods in a furnace. Photo: Juice Verve / Shutterstock

An engineer watches hot molten forged steel rods in a furnace. Photo: Juice Verve / Shutterstock

While he said that the "ideal solution" would be the mutual suspension of tariffs, like that agreed on earlier this year in the Boeing-Airbus dispute, he was open to "other possible solutions".

"We understand the willingness of the US to protect its steel industry, but certainly there are ways to do it in a way which is less disruptive for EU producers," Dombrovskis told the FT.

In May, the EU shelved its plan to hike tariffs on a wide range of US products in what was widely seen as an olive branch to the new administration in Washington. The dispute began in 2018 when then-President Donald Trump slapped high tariffs on steel and aluminium imports from Europe and other countries.

The measures imposed by the Trump administration were based on national security grounds taken from section 232 of the US Trade Expansion Act of 1962. This justification from what had long been a firm ally raised a lot of eyebrows across Europe.

In retaliation, the EU slapped its own tariffs on US goods, but following Joe Biden's inauguration as president in January, there have been renewed efforts to repair the strained transatlantic trade relationship.

Last month, a breakthrough was reached when Brussels and Washington resolved the 17-year long dispute over aircraft subsidies.

Dropping the section 232 steel tariffs may pose a political headache for the Biden administration. The tariffs are popular within the politically heavyweight US steel industry as well as in traditional mill states such as Ohio, Indiana and Pennsylvania - all likely to be heavily fought over in the next elections.

Dombrovskis is scheduled to visit Washington in the autumn to hold talks with his counterpart Katherine Tai on a wide range of trade issues.

Valdis Dombrovskis

Valdis Dombrovskis served as Prime Minister in his native Latvia between 2009 until 2014. He has held the position of Executive Vice President of the European Commission for An Economy that Works for People since 2019 and European Commissioner for Trade since 2020.

The EU trade chief described the talks with the US on the steel tariffs as being on a "constructive track". While he said that the "complete withdrawal" of the section 232 measures would be the ideal solution with no new measures imposed, he added that the EU was open to looking at "other solutions, understanding the fact that the US also is interested in protecting its steel industry".

He also said that any other solution would need to be less disruptive to EU steelmakers and respect historical trade volumes. "It’s true that steel sectors are highly protected in the US and EU," he said, covering the use of anti-subsidy and anti-dumping measures.

While he stopped short of revealing any details about such alternative solutions, analysts have said there may be a possible licensing or monitoring arrangement that allowed European exporters access to the US market.

While the US may propose a form of export quota, the EU has already ruled that option out. Another option could be to convert the section 232 tariffs into "safeguards" designed to protect the market against a sudden glut of imports. Both of these options, however, would be difficult to square with World Trade Organization rules.

Brussels and Washington have given themselves until early December to reach a settlement agreement, which is also intended to address the oversupply of steel from production in China and other countries.

The discussions over steel tariffs are part of a wider effort on both sides of the Atlantic to strengthen ties following the acrimony of the Trump years.

Last month, one of the outcomes of the EU-US summit in Brussels was the creation of a new Trade and Technology Council, the aim of which is to promote cooperation in vital emerging technologies.

Dombrovskis said that the two sides were looking to establish ten working groups across a wide range of areas, and were currently in the process of deciding which topics to prioritise.

Among the highest priority issues, he listed artificial intelligence, 5G telecoms, 3D printing, the internet of things and robotics, as well as investment screening and internet platform regulation.

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