- The Washington Times - Tuesday, May 20, 2003

The steel tariffs that the White House imposed in March 2002 appear to have weakened foreign governments’ once-iron will to maintain trade-distorting subsidies on steel. At a meeting last week of steel-producing nations, government officials from around the world said they expected to reach an agreement this summer on broadly dismantling subsidies on steel.

The timing of foreign governments’ increased willingness to curb their trade distorting subsidies is noteworthy.

In the fall, the White House will review the steel tariffs, some of which are as high as 30 percent. And though the administration has been widely criticized at home and abroad for imposing the tariffs, they do appear to be pushing governments in the right direction. The United States has been pushing its trading partners to curb steel subsidies since 1989 with no sign of success — until now.

According to Joe Spetrini, the Commerce Department’s point man on global steel negotiations, countries have made “superb progress” on talks on subsidies and the “thinking on substance is converging very rapidly” on the text of a draft agreement. Still, there is much work to be done before the next formal talks reconvene at the Paris-based Organization for Economic Cooperation and Development in June and July, say industry insiders. And there is a major (and underreported) obstacle.

China, the world’s largest steel producer, hasn’t participated in any talks on steel subsidies and appears unwilling to do so. U.S. steel producers, which are sideline players in the talks, say they won’t back a global agreement on steel that doesn’t include China. The more than 70 governments involved in the steel talks should collectively mount considerable pressure on China to abide by the international consensus on steel subsidies, which are a chief cause of the global glut. If China doesn’t cooperate with other countries, it should face consequences.

Ultimately, though, an agreement that would involve key players — such as the European Union, Japan, Russia, South Korea and Brazil — may be worthwhile even without China. Such a deal would still be a victory for the administration, and would give America’s trading partners an opportunity to agree on a major trade-related issue, which has been a divisive area lately.

In September, this pro-free-trade editorial page backed the administration’s decision to impose steel tariffs, in view of the rampant trade-distorting policies implemented by foreign governments. And though the World Trade Organization has ruled against the U.S. steel tariffs, they are still giving the U.S. government better leverage to negotiate an end to the anachronistic policies driving oversupply. The administration was widely accused of imposing the tariffs to win the support of key political states. But officials have worked hard to negotiate reform in the global steel sector, and the results are starting to show. Once a more even playing field is achieved, the administration can begin dismantling the tariffs, and the industry will have to adapt.

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