Mixed Reviews from USW, Trade Association Leaders on U.S.-UK Deal

Recall that on Tuesday the United States and the United Kingdom reached an agreement to ease Section 232 tariffs on steel and aluminum. The UK in exchange agreed to stop retaliatory measures aimed at U.S. exports of items like motorcycles, whiskey and jeans.

The deal, which will go into effect on June 1, 2022, is a tariff-rate quota (TRQ) broadly similar to those already negotiated with the European Union and Japan.

“The SMA is pleased with the 232 agreement between the United States and the United Kingdom. … [It] will help with the problems of global excess steel capacity, transshipment, illegal dumping, and subsidies,” said Philip Bell, president of the Steel Manufacturers Association (SMA).

“We want to congratulate the negotiation teams from USTR and Commerce for a job well done. This group has reached three major agreements with the EU, Japan, and U.K. in under six months. Their hard work and determination are appreciated,” Bell added.

The SMA is one of two lobbying groups that represent domestic mills. The United Steelworkers (USW) union also cheered the deal.

“The USW supports the 232 arrangement between the United States and the United Kingdom… as an important step in addressing systemic problems like illegal dumping and global overcapacity that threaten the vitality and future of our steel and aluminum industries,” said Tom Conway, president of the United Steelworkers International.

And that means something from a union that “backed the 232 relief measures from day one,” added Conway. “They helped spur investment, production, and job creation in the steel and aluminum sectors.”

Conway, whose union represents 850,000 workers across a wide range of industries, including metals and mining, was also pleased that the deal with the UK leaves the overall structure of Section 232 largely in place.

The American Metals Supply Chain Institute (AMSCI), which represents trades and steel consumers, didn’t share that view.

“The partial suspension of Section 232 tariffs on UK steel and aluminum imports is good news,” said Richard Chriss, president of the American Metals Supply Chain Institute (AMSCI). “Regrettably, however, by not fully lifting the national security-based tariffs imposed in this unnecessary four-year dispute, this deal does not remove the implication that steel and aluminum imports from the UK, our closest ally, constitute a threat to U.S. national security.”

Chriss thinks the U.S. missed an opportunity to expand free trade, especially as the Russia-Ukraine war threatens a significant economic slowdown in Europe with ramifications for the domestic market too. “This is the moment to pursue greater ambition in trade, not less,” he said.

Also of note, the deal will see the U.S. and UK work together on issues of subsidies or duty evasion. The text of the deal spells out that a third-party audit could be invoked for any Chinese-owned UK steel producer should they be suspected of duty circumvention or of receiving subsidies from China.

Reviews are mixed on that issue too.

For Bell, the audit of Chinese-owned steel producers in the UK should “help prevent favorable Chinese financing and subsidies and thwart China’s attempts to evade fair trade laws by using foreign investment.”

Conway agreed saying: “The U.S.-UK arrangement will require annual audits to ensure the Chinese-owned company British Steel is not receiving preferential financing from the People’s Republic of China and will help stem the Chinese Communist Party’s attempts to use companies around the globe as its agents.”

The text of the TRQ deal with the UK did not name British Steel, which is owned by Chinese steelmaker and multinational conglomerate Jingye Group. But the company fits the profile of a Chinese-owned UK steel producer potentially subject to audit.

British Steel and Jingye Group did not respond to requests for comment.

Kevin Dempsey, president and CEO of the American Iron and Steel Institute (AISI), thinks this issue is where the deal is iffy. He is concerned one of the largest producers in the U.K. – despite being a subsidiary of a Chinese entity – will get the same duty-free access to the American market as others do.

“I think the administration has tried to address this by coming up with this audit scheme, but it’s not clear what that’s going to do. We’re pouring over the language of these provisions and still have many questions,” he said.

Though the audit is designed to ensure a company is not supported by market-distorting practices, Dempsey questions whether audits will ever be disclosed. His major gripe is the agreement might protect any audit properly identified as containing proprietary information from public disclosure to the extent permitted by U.S. law.

“No one in the American steel industry will ever have a chance to review what exactly has been determined about money coming from China to benefit British Steel,” he said.

By David Schollaert, David@SteelMarketUpdate.com