The US International Trade Commission's (ITC) ruling that the US steel industry was not materially injured by alleged dumping of cold-rolled sheets is much more than a simple surprise. The country that had taken a lead in slapping trade actions one after another in the past few months was expected to act the same way in the cold-rolled sheets case as well. Most of the criticism against the US government in the steel trade cases is not on how many such actions it has taken, but the manner in which the same were taken. Experts from all over have called most such actions arbitrary and protective. Unnecessary as well and rightly so.The US government was all out to protect its industry that faced a record surge of imports - obviously in a year that had also seen unprecedented increase in steel demand in the country. The government had taken all the decisions fast so that the domestic industry is saved in time.
When there was no case of dumping and subsidy, the US went to the extent of slapping safeguard actions against wire rods and line pipes. One is left still wondering if it was the same US so vocal for global free trade that had taken these action. Right or wrong, with these actions the steel industry in the US was upbeat and managed to recover much of its ground in the days that followed. With such heavy protection, the US industry could fetch prices that no other producer perhaps could dream of in any open economy anywhere else in the world.
Is it a change of attitude of the US government, a strong defence by the accused companies or that the US industry and the government now finds that the prices have risen enough and that at the ruling prices there is no import threat?
It is difficult to track any change in the mood of the US government on the trade cases as the government really has not been seen to have made any statement to that effect.
The fact that the accused countries did not take these cases lightly leaving the same to only legal experts has been reported widely. The accused countries this time took resort to strong econometric models to establish that there was no injury to the domestic industry. With the help of sophisticated econometric techniques the counsel for the foreign companies argued that the domestic steel industry's losses during the period of investigation could not be linked to either adverse volume or price effects.This is significant. Because, if causality cannot be established, there cannot be an anti-dumping action. Most of the time, a casual approach in defending a case costs a country heavy. After the rounds of trade cases, the companies and the counsel have become smarter and more learned.
The public version of the ITC staff report, one of several sources of information considered by the commission in examining the case, found the econometric model sound, its statistical techniques correct and the basic results strong. Even the in-house economists reported to have found the results `well specified' and `defensible'.
Interestingly, it was war of econometric models. Even the petitioners responded with a counter model trying to establish what they had claimed : the US industry was adversely affected by flood of dumped imports. The results of this model was rejected by the US trade commission as they were unwilling to take the model that was based on historical data for the period 1960- 1989 and involved products that had higher levels of import penetration that cold rolled sheets.
The ITC found that: "The results do provide statistical evidence that:-
The average unit value of hot-dip galvanised steel,
The galvanised capacity,
The average unit value of domestic hot-rolled sheet and The average unit value of imported hot-rolled sheet all have directly affected the domestic average unit value of cold-rolled steel. The results also consistently fail to find evidence that any of the following have affected the average unit value of domestically produced cold-rolled steel;
The average unit value of all subject imports;
The average unit value of all non-subject imports; and
The quantity of domestic shipments."The point is not why one model was accepted and the other not. The point is that it is for the first time that a group of countries engaged such tools of economic analysis to defend a case that is usually left solely to the general skills of the lawyers on legal matters. The combined efforts of the lawyers and the economists thus clicked.
Strong economic logic although worked effectively, there is a need also in considering the fact that the US industry is longer interested in any trade dispute at the current high prices. After all, the industry will continue to gain from the actions already in force. They will also gain from the signal the government sent out that it can act tough anytime needed to protect its industry. The importers, therefore, are cautious as much as the overseas exporting companies. The foreign companies do not want to get entangled in long drawn and expensive legal battles. The domestic companies too want to avoid the same. A dispute costs them as much.
Thus, while the econometric model did the trick with the ITC officials, a rational economic sense, the futility of wasting money on matters they cannot expect to gain much from, perhaps decided the cold rolled case.
The author is convener of Steel Exporters' Forum and the views expressed here are his own
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.