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US, EU agree steel tariff truce

The United States agreed to partially replace its Trump-era Section 232 tariffs on steel and aluminium originating in the European Union and replace them with tariff rate quotas for the next two years.

In response, the EU has announced will suspend plans to double its rebalancing tariff measures on a range of US products from 1 December, whilst reiterating it would like to see the Section 232 tariffs disappear completely.  This measure will need to be agreed with the EU capitals during November.

The tariff rate quotas reflect the data for the periods 2018/19 and 2015/17 for aluminium and steel respectively. In practice this means that the EU can export annually 18,000 metric tonnes of unwrought aluminium and 366,000 metric tonnes of semi-finished wrought aluminium and 3.3 million metric tonnes of steel before the tariffs kick in.

These steel exports are in addition to the 1.1 million tonnes of steel products which will continue to be excluded annually from the tariffs to ensure their affordability for US industry, hence bringing the total number of tariff-free EU steel exports to 4.4 million tonnes.

“This is another significant step in the wider reset of transatlantic relations,” said Commission Executive Vice-President Valdis Dombrovskis.

“The US decision to restore past trading volumes of EU steel and aluminium exports means we can move on from a major irritant with the US. It gives us breathing space to work on a comprehensive solution to tackle global overcapacity.”

The Commission also welcomed the 2015/17 reference period for the TRQ for steel, since the period thereafter showed a sharp fall in exports. A 2020 reference period would have resulted in the TRQ being reduced to 2.4 million tonnes.

Similarly, the Commission explained how the 2018/19 reference period for aluminium is also beneficial for the EU, since this is when exports to the US rose, despite the 10% tariff.

As a result of the agreement, the EU has agreed to suspend – but not withdraw – its dispute settlement case at the World Trade Organization regarding the tariffs.

Global steel and aluminium arrangement

Both sides have also pledged to work towards a global steel and aluminium arrangement to tackle global overcapacity, especially when it comes to steel, as well as questions related to greening the two sectors. Such an arrangement will, it is hoped, result in the US Section 232 tariffs disappearing in the next two years.

The Commission has said this arrangement will be WTO-compatible and open to “likeminded partners”. But many of the  arrangement’s details still need to be worked out, notably whether it will preclude the US from being affected by the Commission’s proposal for a carbon border adjustment mechanism.

A technical working group will be created as part of the arrangement to develop a common methodology and share relevant data for assessing the embedded emissions of traded steel and aluminium.

The past week saw long and intensive negotiations between the EU and US in order to meet a Commission deadline of 1 November, which would allow the EU side time to make the necessary arrangements to stop the clock on the retaliatory tariffs which were to begin a month later.

“Europe is not part of the problem concerning overcapacity,” said Dombrovskis. “This is why we need to work jointly with the US and do so in line with our international commitments and multilateral rules.”

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