US and UK launch negotiations on removing Section 232 steel tariffs

Negotiations are set to begin imminently on how to remove United States ‘Section 232’ tariffs on United Kingdom steel and aluminium exports.

The move, announced today, has come just a week after Unites States Trade Representative Katherine Tai had appeared to de-prioritise the resolution of the steel issue with Britain in a comment that the dispute would be addressed “when the time is right”.

In a joint statement, the two governments said that bilateral discussions on the issue would start “today”, and that London and Washington would jointly seek “an expeditious outcome” to resolve the issue of the tariffs on UK exports – and also the UK’s continuing retaliatory tariffs on a number of US exports.

The green light for the negotiations came following a virtual meeting between US international trade secretary Anne-Marie Trevelyan and US Commerce Secretary Gina Raimondo.

Addressing ‘excess capacity’ in steel sector

The talks look set  to follow a similar trajectory as those which resulted last October in an agreement between the EU and the US to create duty-free tariff rate quotas for European steel.

Like the EU-US negotiations, the talks between the US and the UK will be framed in the context of joint collaboration against a common Chinese adversary.

“The distortions that result from excess capacity [in the sector] pose a serious threat to market-oriented steel and aluminium industries in the United Kingdom and the United States, and to the workers in those industries,” said the joint statement.

“As the United Kingdom and the United States are close and long-standing partners, sharing similar national security interests as democratic market economies, they can partner to promote high standards, address shared concerns and hold countries that practise harmful market-distorting policies to account,” it added.

‘National security’ arguments skewered

The reference to shared “national security interests” represents a tacit acknowledgement by the US government that the security interest arguments used by the previous Trump administration to justify applying the Section 232 tariffs were without foundation.

Trevelyan, Raimondo and Tai are now set to enter into discussions on “the mutual resolution of concerns” in this area, and “the deployment of effective solutions, including appropriate trade measures, to preserve our critical industries”, the statement concluded.

On the assumption that the solution for the UK mirrors that which was found for the EU, the UK-US negotiations are likely to focus primarily on finding an appropriate level at which to set duty-free tariff-rate quotas for UK steel exports.

UK Steel ‘warmly welcomes’ start of talks

The news that talks were under way was “warmly welcomed” by UK Steel, the industry body representing the British steelmaking sector.

“With the recent removal of US tariffs on EU produced steel, UK producers currently face a 25% price disadvantage compared to their EU competitors. That a few weeks into 2022 a resolution appears to be in sight is hugely welcome news to the steel sector and steelworkers across the UK,” said a statement by UK Steel.

“The tariffs have already reduced UK exports to the US by nearly 50%. We hope the UK Government can put its new independent trade powers to full use, building on the terms of the EU’s deal and delivering the best possible outcome for UK producers.”

A changing political picture?

At a political level, the resumption of talks removes a potential source of political embarrassment for the British government, which has staked a great deal on its close trade relationship with Washington, and which would not have appreciated being ‘left behind’ the EU in taking steps to resolve the steel trade dispute.

It is not clear to what extent the slightly more emollient language emanating from London in recent days over the implementation of the Northern Ireland protocol – an issue which is being followed very closely in Washington – may have prompted the US to begin the negotiations with the UK.

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