*EPF404 05/30/2002
U.S. Official Clarifies, Promotes Steel Tariff Exclusions
(Vows swift action on exemptions) (600)

By Andrzej Zwaniecki
Washington File Staff Writer

Washington -- The United States is willing to grant exclusions from the temporary tariffs imposed on steel imports by President Bush as long as they do not undermine the steel safeguard itself, a senior Commerce Department official says.

Speaking May 30 from Brussels with reporters via a teleconference call, Under Secretary of Commerce Grant Aldonas said that decisions on exclusions depend on whether any U.S. manufacturers are able to make products subject to exclusion requests "within a commercially reasonable timeframe." Lack of relevant capacity in the United States would be viewed by the Bush administration as an argument for granting an exclusion, he said.

Aldonas said he assured European Union (EU) officials and steel-makers with whom he held talks in London and Brussels the week of May 26 that the United States would try to complete the exclusion process as quickly as possible because the benefits of exclusions are as important to foreign exporters as to U.S. steel-consuming industries.

"We are not trying to create uncertainty in the market, especially where there are no U.S. producers," he said.

The United States has ruled out compensating countries affected by the safeguard tariffs, arguing that the remedy is consistent with World Trade Organization (WTO) rules. This position was upheld by Aldonas, according to press reports.

European and other steel-producing countries have contested this view and some have challenged it in the WTO.

Aldonas said he was not trying to placate some European trading partners by promoting exemptions for their special products. He was responding to published reports describing his presentation of the U.S. exclusions as an effort intended to discourage the European Commission from imposing retaliatory countervailing duties on U.S. exports.

"We are not shopping the exclusion process around but rather trying to clarify it," he said.

A commission spokesman said U.S. exemptions that benefit European companies would be taken into account when the commission considers its response to the U.S. safeguards.

EU ministers are due to announce their decision by June 18. Some countries, including Germany and Sweden, have expressed reservations about the necessity of making the decision so soon.

The Bush administration is scheduled to decide on exclusions by July 3, but Aldonas said some decisions would likely emerge sooner.

Aldonas noted that prices of steel have increased "dramatically" in recent months as a result of capacity cuts made before the president's safeguard decision.

But he added that it is uncertain "whether these prices are sustainable over the long haul." Only sustained prices would allow U.S. steel companies to obtain money for restructuring, which is the ultimate objective of the safeguard, he said.

Aldonas said that U.S. restructuring would be helped by excess capacity reduction in other countries.

If major steel-producing countries can agree on further cuts in excess capacity, Aldonas said, the need for intervention in the market will be significantly reduced.

During multilateral talks under the auspices of the Organization for Economic Cooperation and Development (OECD), steel-producing countries have pledged to reduce excess capacity by 120 million tons by 2005. However, U.S. officials argue these pledges fall way short of solving the worldwide glut because they leave 80 million tons of excess capacity on the market. They also insist that other countries need to address market-distorting practices that perpetuate overcapacity.

Aldonas said he discussed with European officials how to formulate a proposal that would move the OECD talks on to new disciplines on these practices. He said they agreed to continue discussion on the technical level.

(The Washington File is a product of the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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