A record 41.5 million tonnes of foreign steel that hit the US shores in 1998 at extraordinarily low prices at a time when the US steel market was booming. In a united effort, steel producers and steel workers wanted strong action against imports of steel which they said were `unfairly traded', `dumped' or `illegal' in most cases. The government agencies lent them support. Quick action was taken to put anti-dumping and countervailing duties on imports of several critical products from some of the major exporting countries. The government had made it abundantly clear that it would go all out to protect the steel industry.

The much awaited government package has now been opened up. Essentially, the 12-point agenda has four important points.

One, the US administration has decided to wage a war against `subsidies' to steel industry worldwide. It has been the understanding of the US industry that dumping is an act of underpricing carried out with illegal state subsidies or by companies with excess capacities maintained through government subsidies or assistance. They perhaps believe and rightly so that an act of underpricing cannot be perpetuated for long without support from outside agencies including the state. But, what they have not seen is the fact that although not indefinitely, a company can continue selling below costs of production and sustain losses because they may have easy access to bank's funds or even shareholders' equity. According to the American thinking reflected in the NSAP, state-owned steel companies elsewhere in the world face no bankruptcy as there is constant flow of state funds. The American view is not entirely correct because, over a period of time, globally, government stakes in steel business are on the decline. Steelcompanies are being privatised either through outright sales or change in management through change in equity holding. In the market economies, even state-owned companies are finding it tough getting government funds. They have to tap the same sources as their private sector counterparts do - the public money - from banks, financial institutions and individuals. The NSAP is silent on the use of public money. They know that if this aspect is taken up, their own companies will be in trouble for being in business that does not pay.

Two, the US administration has made it clear that they will have strong WTO compatible trade law and its determined enforcement. If so, the American companies can hope to get better results in the anti-dumping and countervailing cases they lodge against foreign steel. It is common knowledge that the US industry used to file a dumping case at the slightest pretext to scare away imports. The US has only been known for reaching great heights in arriving at lofty rates of dumping or countervailing duties and also maintaining the same for a long time - sometimes over decades. Till recently, they did not even have a sunset clause in their law to review a trade case. One indication they have given is that they are going to codify and promulgate the recent decision of the department of commerce to have a preliminary determination of critical circumstances into law. Three, in a stunning declaration, the US administration says that it would block multilateral development banks from lending to industries that seeks to`increase subsidised steel production'.

But, what about greenfield steel ventures that may be supported and subsidised later? The US government wants international financial institutions to help privatisation of steel industry globally and particularly in the former USSR countries and eastern Europe. So US wants a global solution to their steel industry's problem!

Four, the US government will promote export of steel by providing' marketing and training support in export markets' in a `WTO-consistent manner'. Then, if they have to export `commodity' steel, the same has to be done at world prices likely to be lower than those in their own market. Will they do that? In that will they not come under dumping charges?

Interestingly, it is also the American industry charged with dumping elsewhere in many steel cases. The administration will also `explore federal funding as appropriate for steel worker training, including but not limited to funding for the Institute for Career Development'. The administration really had to work hard to word this declaration as the same may again be termed as subsidies. One does not really know what they plan to do with this.

The US also has few more items in its plan: Improve the system of collection, processing and dissemination of steel import data, hold a conference on the impact of unfair trade practices on the US steel industry and its upstream suppliers, hold a global conference on excess capacity in the steel industry and initiate bilateral talks with other countries to put an end to subsidies. Commenting on Japan's June 11 industrial restructuring and employment package, the NSAP says: "We will, among other things, endeavour to ensure such plans do not involve unfair or trade distorting subsidies, government programs or policies that would support excess production capacity." This is not merely a concern of the US over subsidies, but also an indication of how far they can go to interfere in internal business matters of other countries.

The US administration has clearly gone beyond their territories in protect their troubled steel industry. They have now a global agenda. Some of the positions taken such as blocking involvement of multilateral agencies in investment of steel industries enjoying subsidies do not make any sense. After all, how much of stakes do such organisations have in the world steel business? Again, is it within the financially justified realm of business decisions for the global financial institutions to invest in the ailing steel companies in the former USSR to cut capacity, clean up environment, retrain labour or have market based pricing? The US steel plan is not aimed at solutions of the problem at home or elsewhere in the world. It is merely a signal to steel exporting countries to fall in its line.

The author is convener of Steel Exporters' Forum and the views expressed herein are his own

Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.