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 left the domestic producers scurry for support. In a united effort, steel producers and steel workers rallied under one banner: Stand up for steel. They 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. With Russia and Brazil, the US signed `comprehensive' and `suspension' agreements against imposition of anti-dumping duty on hot-rolled coils. 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 for quite some time now that dumping is an act of underpricing carried out with the help of illegal state subsidies or by companies having 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. This not only helps them to survive even in the most adverse conditions of market but also helpsthe companydirectly to bring down prices to abysmal levels in a competitive market. With this, these state-aided companies maintain their market share even with inefficient operation.

The American view is not entirely correct because, over a period of time, globally, government stakes in steel business are on the decline. Steel companies 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. This public money does support an ailing business exactly in the same way as state aids do - at least in the short run. It keeps the company above bankruptcy levels. It also helps the company maintain operation at totally unprofitable prices. 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. That is all because there are generous banks there to bail them out of any trouble.

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. As if there has been less of it till now! The US industry has the distinction of filing record number of trade cases in steel so far. Perhaps, they also distinguish themselves with the highest casualty in the cases they have filed. 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. They say that all that they have done so far to protect their industries were not strong enough. The stronger actions arecoming now - God knows what! 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. With this importers will be scared away earlier with the threat of a preliminary (or ad hoc) ruling.

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'. That means that the typical commercial profit-seeking considerations for lending will be out in the dumps and the agencies like the International Finance Corporation will have to see additionally if the company they are lending to receives state subsidies in any form. This may also be possible. But, what about greenfield steel ventures that may be supported and subsidised later? The US government wants the international financial institutions to help privatisation of the steel industry globally and particularly in the former USSR countries and eastern Europe. So the US wants a global solution to the problem of their steel industry!

Four, the US government will promote export of steel by providing' marketing and training support in export markets' in a `WTO-consistent manner'. The question is after protecting their market to the extent possible for their own industry will the American industry have any inclination to export when the prices are low especially considering the fact that in the US domestic production falls far short of demand every year. 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. In most investigations so far, the US government agencies have eyed with suspicion the export promotional activities undertaken by the government agencies for the industry as subsidies. 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. Whereas the first few are welcome, why should there be additional bilateral talks on this matter when there are clear global acceptance on it brought in by the WTO?

Commenting on Japan's June 11 industrial restructuring and employment package, the NSAP says: "We will, among other things, endeavor 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. Whereas many of the basic issues they have highlighted need global attention, instead of taking unilateral position on those, it would have been more appropriate if the same were discussed worldwide and a consensus on a global solution of the steel industries woes was reached. 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? What will they gain out of it? For that matter why should the steel industry there borrow money to cutcapacity?

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 the steel exporting countries to fall in its line.

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