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Expert: China Unlikely to Be Exempted from US Steel Tariff

China is unlikely to be exempted from the controversial US tariffs on steel imports despite the pressure the Chinese Government has put on the Bush administration, according to industry experts.

"There is nothing I am aware that can be done to change this," said David H. Phelps, president of the American Institute for International Steel (AIIS).

He suggested that Chinese steel producers look for specific product exemptions to export to the US market.

Phelps said the AIIS is "cautiously optimistic about how this process will work."

He said he believed the Bush administration will take into consideration the needs of US steel users and "assure that needed steel can enter the US outside the 201 tariffs for products not available in the US or in short supply."

"Chinese steel producers, who make high-end products consumed in the United States but not available from US steel companies, or not available in sufficient quantities, should work with their customers to fashion exemption requests."

The president said there are signals that the US Government will give serious consideration to US steel consumers' needs in adjudicating exemption requests.

He said these were big opportunities for steel companies who have unique products or products that add significantly to the profit margins of steel producers.

Zhou Shijian, vice-president of the China Chamber of Commerce for Minerals, Metals and Chemical Products (CCCMC), said it is important for Chinese steel companies to improve their after-sale services, diversify their products and upgrade the level and quality of their products in order to improve their competitiveness on the global market.

Phelps said the US steel market is poised to return to growth this year, with prices much higher than in 2000 or 2001 and substantially above international prices.

Some analysts believe that the market will be strong enough even to absorb the 201 protectionist duties and allow imports to enter the US market.

The US steel market is expected to rebound as a result of a string of closures of steel making facilities resulting from bankruptcies which have eliminated an estimated 15 million tons of hot rolling capacity, they said.

One analyst made the bold prediction that even with the US-imposed tariffs and dumping duties, US steel imports will actually increase this year compared to 2001 as a result of the strength of the market.

Phelps said the AIIS remains optimistic that "the Doha Round provides the best opportunity for the world to make US trade laws more rational."

"The United States has significant objectives for the Doha Round and at some point the needs of the huge US economy will overwhelm the protectionist demands of the small US steel industry," he said.

The United States raised tariffs on steel imports from 8 per cent to 30 per cent in late March in an effort to help the ailing US industry, which has resulted in protests from its trading partners.

The tariffs exempt countries that have signed free trade agreements with the United States - Canada, Israel, Jordan and Mexico - and developing countries which export only limited amounts of steel to the United States.

The ones hardest hit by the US steel tariffs include Japan, the European Union (EU), South Korea, China, Ukraine, Brazil and Russia.

The EU and Canada have reacted with similar protectionist tariffs on steel imports, and the controversial US tariffs are suspected to be the trigger of a new round of global trade protectionism in the steel industry.

Unsurprisingly, politics underlie the US decision, analysts say. The outcome of the 2002 congressional elections and 2004 presidential election in the United States will greatly influence the future of the tariffs.

CCCMC's Zhou said he expects the Bush administration to relax its present firm stance on the steel tariffs after the November elections this year.

But Philippe M. Bruno, a lawyer with the US law firm Dorsey & Whitney LLP, warned that the tariffs could drag on for three years due to technical issues, although the United States is likely to lose the steel case against its major trading partners in the World Trade Organization (WTO).

The WTO process requires involved countries to conduct bilateral negotiations on the issue for the first year after the complaint is filed.

If these negotiations fail, a panel of three judges is expected to give the WTO verdict on the issue in another year.

After that, the United States could still appeal to the WTO, which could take another six months.

If the United States loses its appeal, it would take another three to six months for the United States to implement the WTO decision.

So in total, US tariffs could be in place for at least three years, and it is hard to predict how far trade protectionism in the steel industry would have gone by then, said experts.

(People's Daily April 30, 2002)

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