Underlying message of retaliatory tariff against the US carries a spirit of robust and independent urge to support the domestic industry against an unjustified onslaught through global trade.
One of the great contributions of US President Donald Trump is to shake up the nationalist feeling and emotions that were lying dormant for ages in most of the countries in the world. Thanks to globalisation and WTO ruled multilateral trades espousing the cause of free and fair trade, any specific country’s efforts to nurture and support the domestic industries were viewed with circumspection bordering on the lines of zingoism. WTO prescribed AD, CVD and Safeguard duties minimised the injury impact on many countries in terms of loss of market, profitability, employment and income due to flow of dumped goods from exporting countries.
Meanwhile, FTAs and other bilateral treaties facilitating imports at progressively reduced duties resulted in irreparable damages in specific sectors and reversed the balance of trade scenarios. Continued steel imports despite a spate of AD, CVD and SD against the offending nations adversely affected the health of the manufacturing sector as a whole. The situation prompted Trump to announce in March 2018 a 25% and 10% duty hike on all imports of steel and steel articles and aluminium, respectively. A number of trading partners initially sought exemptions citing not responsible for causing harm to the security of United States, one of the primary reasons forming the background of the duty hike.
A few countries, including India, took the case to the Dispute Settlement Wing of WTO, a long drawn mechanism for giving relief to the affected nations. A few countries looked the whole issue with pragmatism. South Korea, Argentina, Australia entered into a Quota system of capping 70% of their average exports to the US for the last 3 years. Japan is still wondering why they have been slapped duties as the steel products they export to the US is value added steel not indigenously available. China has adopted retaliatory tariffs on a number of products (not steel alone) imported by the US from it. Since then, the US has also expanded the list of items being imported from China for fresh levy of duties. The fight in the global trade is very much on.
Against this backdrop, the latest notification (20th June 2018) by commerce ministry to hike the duty rates on steel and steel containing goods imported from the US is significant and the commerce as well as steel ministry are to be congratulated for this timely and bold step (“circumstances exist which renders it necessary to take immediate action”) to support the domestic industry (not steel alone).
During FY18, India imported 46,000 tonne of Tinplates from the US which was 36,200 tonne in FY17. The customs duties on Tinplate from the US have been raised from the current 12.5% to 27.5%. In FY18, India imported 35,000 tonne Alloy/SS from the US which was 21,200 tonne in FY17. The customs duties on SS Flats have been raised to 22.5%. On Electrical Sheets imported from the US, the customs duties have been raised to 20% from the current 12.5%. In FY18 and FY17, the US exported 43,000 tonne and 46,100 tonne of Pipes, Fittings and miscellaneous steel items, respectively. The government has raised duties to 25% on Tubes or Pipe, fittings, structures and parts, tanks, Towers, Bridges, doors, shutters, screws, nuts and bolts and others.
More than 6,22,000 tonne of Melting Scrap imported in FY18 and 7,53,100 tonne in FY17 by India have been sourced from the US. No duty has been raised on this item as a relief to the SME sector. In addition, some food items like Chana, Lentils with duty hike of 40-70%, Almonds, Apples with duty hike of Rs 42-120 per kg, 75-100%, Phosphoric and Boric Acid with duty hike 17.5-20%, prepared binders for Foundry Moulds, Chemical products with duty hike of 17.5-20%, all (part of it) imported from the US, have been imposed.
All these hikes in duties would be reviewed on August 4, 2018 when the trade negotiation with the US is scheduled. As a nation one should feel proud that the government has taken the most appropriate step under the circumstances when other nations are contemplating the pros and cons of the measures. It is a fact that both in terms of volume and value, the specified categories with duty hikes are not critical from the point of view of balance of trade considerations. But the underlying message of retaliatory tariff against the US carries a spirit of robust and independent urge to support the domestic industry against an unjustified onslaught through global trade.
As the story of global merchandise trade is still to unfold in full in the coming months, the industry needs to be watchful to bring to the notice of the government any additional steps that would be required. During the first two months of the current fiscal, steel imports at 1.4 MT have grown by more than 20%, while steel exports at 1.27 MT went down by more than 14%.
Is the apprehension of the US diverted steel exports flowing to India in a much larger scale going to be true, a question the events in the next 2-3 months can only tell.
The author is DG, Institute of Steel Growth and Development
(Views expressed are personal)