U.S. Steel Import Restrictions Increase Risk

- Jun 10, 2020-

The results of the investigation of foreign steel imports will be released this week

   Analysts said the move may incur trade retaliation and even impact the current global trading system

  According to foreign media reports, the US Department of Commerce's investigation of foreign imports of steel products is expected to be released this week as soon as possible. This result may make US President Trump's policy proposal to restrict steel imports based on "national security" gradually come into effect. Allied countries represented by EU countries have recently shown concern. Analysts said that if the United States adopts a steel import restriction policy, it will inevitably incur trade retaliation and even impact the current global trading system.

  According to Article 232 of the US Trade Expansion Act of 1962, the US Department of Commerce launched an investigation in April on whether foreign imports of steel products harm US national security. US Secretary of Commerce Ross revealed that the Department of Commerce will submit a report on the national security impact of steel imports to Trump at the end of June. Trump has launched two such investigations, one for aluminum and the other for steel. Ross said on the 19th that the United States is also considering other investigations.

  If it is determined that steel imports threaten national security, Trump will have 90 days to decide whether to use the "Article 232" mandatory authorization to adjust product imports or take other non-trade-related measures. In determining what threatens national security, US law gives the president extensive freedom of movement. Trump’s aides have also made it clear that they have taken a broader perspective than the previous administration.

  The US Secretary of Commerce Ross said at a conference hosted by the Wall Street Journal last week that the definition of national security by the law is much broader than everyone thinks. He pointed out indicators such as the impact of trade on employment. Ross said that the scope of US officials' consideration is not limited to military concerns. He pointed out that there is only one manufacturer in the United States that produces steel for transmission network transformers. Ross said that for him, this is a legitimate national security issue.

  The NATO partner countries that are likely to be affected by the move, which are producing steel, have recently rushed to refute the claims of national security and warned that the move may increase tensions in the transatlantic alliance. According to the Financial Times, in the past two weeks, military officials in Germany and the Netherlands have reflected their concerns to the US Department of Defense and its Secretary of State Mattis. Officials in Washington say Mattis has conveyed their concerns. This lobbying strategy is extremely unusual, because US defense officials are usually not involved in trade disputes.

  The G20 summit will be held in Hamburg next month, and Germany is particularly concerned about the impact of US measures on steel imports. European officials warned that U.S. actions against steel imports will fuel anti-American sentiment in Europe, furthering the existing friction caused by the new sanctions imposed by the United States against Russia, the withdrawal of the Paris climate agreement and Trump’s skepticism towards NATO has further increased.

    The steel survey also triggered another fierce trade debate within the United States.

  Trade hawks are pushing Trump to impose comprehensive tariffs on imports, while pro-business parties such as National Economic Council Chairman Gary Cohen advocate restraint. After the allies expressed their views, Matisse also joined the camp that advocated restraint.

  Representing 70% of the US steel production capacity, the American Iron and Steel Association recently called on the Trump administration to rule as soon as possible that foreign steel imports damage US national security to prevent steel imports and protect the domestic steel industry. The association claims that without the healthy development of the US steel industry, the US will soon lose the ability to produce steel products for national defense. The US government should look at the impact of steel imports on national security from a broader perspective.

However, the U.S. Major Trade and Manufacturers Association has submitted a written opinion to the U.S. Department of Commerce urging the U.S. government not to use the "section 232" to widely restrict the import of foreign steel products. Otherwise, it will not only harm the interests of the U.S. steel consumption industry, but also weaken the U.S. manufacturing industry’s international Competitiveness will also attract trade retaliation from other countries.

The National Foreign Trade Council, which represents more than 200 U.S. companies, stated in a written opinion submitted to the U.S. Department of Commerce that the steel consumer industry accounts for a much larger proportion of U.S. economic output and employment than the steel production industry, and many steel consumer companies are also ships, Major supplier of US defense products such as aircraft and high-tech weapons. If the production capacity of these steel-consuming enterprises is reduced, the national security of the United States will also be weakened.

  The council warned that the widespread implementation of import restrictions on US trading partners also has the risk of incurring trade retaliation or harming many competitive industries in the United States.

  The post-World War II arrangement under the supervision of the World Trade Organization (WTO) contains a national security exception. Trade law scholars refer to the exception as the WTO's only "discretionary" clause. Officials have long been concerned about the extra-regulations of this regulation, which could subvert the entire trading system if it is used arbitrarily. Since 1949, only 10 national security-related cases have been submitted to the WTO, but all parties have reached a settlement before the WTO ruling.