No. 7 — February 18, 2000


Weekly Review


Steel - Sometime early in the fall, a World Trade Organization dispute-settlement panel will decide whether the United States went beyond the bounds of international trade law in June 1999 when it slapped market-excluding penalty duties on made-in-Japan carbon hot-rolled steel products. Tokyo set the stage for this outcome by charging in a November 18 complaint that Washington had played fast and loose with U.S. antidumping procedures in pursuing what became the first in a fusillade of unfair pricing cases directed against Japanese steel mills (see JEI Report No. 43B, November 12, 1999). Consultations, the initial step in the WTO dispute-resolution process, took place January 13. They were the pro forma talks that both sides had anticipated. International Trade and Industry Minister Takashi Fukaya consequently announced February 10 that Japan would seek the formation of an arbitration panel at the February 24 meeting of the Dispute Settlement Body, which consists of all WTO members. The United States is certain to exercise its right to block this move. Under the Geneva organization's rules, however, the second Japanese request for a panel, to be made at the March DSB session, will win automatic approval.

The three WTO arbiters will have six months to determine the merits of Tokyo's criticism of how Washington handled the antidumping case involving hot-rolled steel. The complaint turns on both the methodology used by the Department of Commerce to come up with dumping margins as high as 67.14 percent and the analysis underlying the International Trade Commission's conclusion that this below-market pricing had an adverse impact on the operations of American steel mills.

Although only the antidumping-duty order on hot-rolled steel is at issue, the dispute-settlement panel's ruling will have implications for the bulk of Japan's U.S.-bound steel shipments. Carbon cut-to-length steel plate products made by Kobe Steel, Ltd., NKK Corp., Nippon Steel Corp. and Sumitomo Metal Industries, Ltd. are now subject to prohibitive tariffs of 59.12 percent after the ITC unanimously decided January 19 that underpricing of this magnitude, calculated by Commerce in its December 13 final antidumping determination, injured competing U.S. suppliers. Only Kawasaki Steel Corp. has any chance of remaining in the American plate market since the department rewarded it with a 10.78 percent margin for cooperating with investigators.

Carbon cold-rolled steel products are likely to be affected as well by the results of the WTO arbitration process. Commerce is prepared to sock KSC, Kobe Steel, NSC and Nisshin Steel Co., Ltd. with antidumping tariffs of 53.04 percent if, as expected, the ITC votes March 3 that this degree of below-market pricing — set January 19 after the four Japanese firms opted not to participate in either the department's preliminary or its final investigation — had negative repercussions for cold-rolled steel sales by U.S. steel mills.

The American market fate of large-diameter seamless carbon and alloy steel standard, line and pressure pipe and smaller sizes of the same products also will hinge on what happens in Geneva. Using data contained in the petition, Commerce announced dumping margins of 107.8 percent (large-diameter pipe) and 106.07 percent (small-diameter pipe) on sales by KSC, NSC and Sumitomo Metal Industries in a December 8 tentative ruling. The final pricing determination is due February 22, followed by an ITC injury finding no later than April 7.

Structural steel beams manufactured by KSC, NKK, NSC, Sumitomo Metal Industries, Tokyo Steel Manufacturing Co., Ltd. and Topy Industries, Ltd. are in the same fix. In a preliminary ruling released February 3, Commerce established a common 65.21 percent rate for below-market pricing. It expects to finalize this ruling April 17. An ITC injury determination could come as soon as June 1.

In the first week of April, Commerce also will have to make two other initial antidumping decisions on Japanese-exported steel. One covers circular seamless stainless steel hollow products; the other involves tin- and chromium-coated steel sheet. Makers of these products also have more than a passing interest in the work of the WTO dispute-settlement panel.

In tandem with the proceedings in Geneva, trade officials from MITI and other ministries will use the consultative mechanism established under the White House's August 1999 steel action plan to challenge what they see as the Clinton administration's protectionist application of U.S. trade laws. The second round of working-level talks will be held in Tokyo in March.

Whatever else is on the agenda, the American participants no doubt will argue that government and industry in Japan are on shaky ground in complaining about Washington's response to the problems that U.S. steel mills have experienced because of the surge in imports from Japan and other countries in 1998. Behind this reasoning are some hard numbers. At a preliminary 3,062,000 tons in 1999, imports of steel from Japan were off a whopping 54.5 percent from the 6,727,000 tons brought into the United States in 1998. However, last year's volume still was higher than the 2,555,000 tons imported in 1997. A return to "precrisis" shipments — read 1997's level — was how everyone from President Clinton on down had said that Japan's steel industry could prove that it was not simply exporting its way out of troubles at home when sales to the United States soared.

The views expressed in this report are those of the author
and do not necessarily represent those of the Japan Economic Institute

Issue Index aaaa 2000 Archive Index aaaa Subscriber Area aaaa Home