NIAS Area Studies
PAKISTAN READER
Photo : REUTERS/Kevin Lamarque
IN FOCUS
By Padmashree Anandhan
EU-US Steel and Aluminium trade deal: Five reasons why
On 30 October, at the G20 Summit, the US agreed to sign the deal with the EU to end the standing dispute over the trade of steel and aluminium. A dispute that arose during former US President Donald Trump, the US levied tariffs on the EU's steel and aluminium exports citing national security concerns. It levied a 25 percent tariff on steel and a 10 percent tariff on aluminium products. To counter this, the EU imposed tariffs on various US products such as motorcycles, motorboats, whiskey, orange juice, and jeans. With US President Joe Biden's willingness to ease the relations with the EU, and the latter's desperation to win back its US steel industry- market, the deal was signed.
What is the deal about?
The current deal, under Section 232, imposes the same tariff rates but with slight relaxation from the EU. It will allow an annual export of 3.3 million tonnes of steel and aluminium in volume, above which the trade shall be subjected to tariff rates. For the US to sign the deal, it also mandated that the EU produce steel domestically to qualify for duty-free exports. The steel produced in the EU must be entirely made from its resources and not imported from China, Russia, or South Korea. This standard has been termed as "melted and poured."
The dispute
The dispute started in 2018 when Trump imposed tariffs on certain steel and aluminium products. This affected USD 7.2 billion imports from the EU into the US, resulting in a 53 percent fall in the EU exports of steel and aluminium between 2018 and 2020. As a countermeasure, the EU increased its duty from 10 percent to 50 percent (USD 3.3 billion) on the affected steel and aluminium products, motorcycles, agricultural goods, and various other products. On a continuation, it was scheduled to double the tariff (USD 7.5 billion) by 01 December 2021 to rebalance the damage caused by the US restrictions.
The relations began to smoothen this year after diplomatic steps were taken by the Biden administration. Starting with the announcement of ending the 17-year dispute over aircraft subsidies, forming a new partnership in trade and technology, agreement on global minimum taxes, and lastly the deal to end the steel and aluminium trade dispute.
What does the US-EU deal mean?
The deal not only mends the transatlantic relations between the EU and the US but also serves larger benefits.
First, it allows both parties to prevent steel imports from China. In the cold war between the US and China, the former aims to bring in the EU as a competitor in the steel industry to side-line the global steel exports of China. The EU as part of its Carbon Border Adjustment Mechanism (CBAM), aims to prevent imports from China that produce steel under low environmental standards.
Second, protection of domestic industry. For the US, eliminating tariffs on its products and averting the doubling up is a great save, but it also gets to protect its steel and aluminium industry parallelly. Due to the limit in the number of duty-free imports from the EU, it ensures domestic competition and prevents steel dump from other countries. In the case of the EU, the steel export, which had fallen below 50 percent (from 4.8 to 2.5 million metric tons) to the US will now boost up with the deal. Hence the steel and aluminium industry of the EU is set to advance.
Third, reduction of steel cost for the US manufacturers. The steel prices have tripled in the past years as the demand rose in the post-pandemic period. This deal would mean lowering the costs and preventing an import surge which will impact US labor unions and manufacturers.
Fourth, it is a backlash for other US allies, which include the UK, Japan, and South Korea since the EU now gets first in line to sign the deal. Hence, it gets to capture the US market for its steel and aluminium products before the competition begins.
Fifth, towards a global deal for green steel and aluminium production. According to the World Steel Association, the steel industry contributes seven to nine per cent of global emissions. The US steel production is based on electric-arc furnaces which have lower carbon emissions than the coal-fuelled blast furnaces used by China. Therefore, mandating the EU to produce steel on the same terms means setting a global green standard for steel production. This at large helps in forming a legal framework for other countries to follow the same to sustain their steel industries at the world market.
References
Ana Swanson and Katie Rogers, "US Agrees to Roll Back European Steel and Aluminum Tariffs," The New York Times, 30 October 2021.
David Lawder and Andrea Shalal, "US, EU end Trump-era tariff war over steel and aluminum," Reuters, 31 October 2021.
Jeff Mason and Jan Strupczewski, "EU and US end clash over steel and aluminium, take aim at China's 'dirty' steel," Reuters, 01 November 2021.
IN BRIEF
By Joeana Cera Matthews and Vaishnavi Iyer
AUSTRIA
Austrian climate minister opts for train travel to the UN climate summit
Leonore Gewsessler, Austria's climate minister, chose to board a train to the UN climate conference, which was held in Glasgow. She stated that travel by train saved more than a tonne of CO2 equivalent per person. Gewsessler tweeted about needing strong railways after having opted for the same with her whole team. She tweeted that they were "excited and full of anticipation" over her recent investment promotion for trains. Further, she announced additional Austrian night trains to begin from 2025. According to the European Environment Agency assessments, train travel is the most environmentally friendly mode of transport in terms of emissions. In 2018, transportation accounted for around 25 percent of the EU emissions, with road transport accounting for the majority. ("Austria's climate minister takes train to COP26 to reduce emissions," Euronews, 09 November 2021)
BOSNIA AND HERZEGOVINA
US envoy arrives for a two-day visit
On 07 November, the US special envoy to the Western Balkans Gabriel Escobar reached Bosnia and Herzegovina to mitigate the increasing domestic tensions. Escobar arrived for a two-day visit and met Dodik on 08 November. Escobar addressed journalists, saying: "One of the things we want to make sure of is that Bosnia remains independent, sovereign and territorially whole." The visit follows the EU's restrained approach to Bosnia's looming crisis. Bosnian-Serb leader Milorad Dodik threatened to create a 'breakaway Serb army' and other separatist measures. However, Dodik did not seem pacified post his meeting with Escobar. He said: "...we would continue with our goal to send certain laws to the parliament of the Republica Srpska and withdraw our consent from issues such as the army, indirect taxation, the court system, and that we will draft new legislation in the next six months." Many have accused Dodik's threats to resemble 'calls for war'. The present escalation of tensions is being compared to the initial days of the Bosnian War of 1992 to 1995. (Una Hajdari, "In Bosnia, US overtakes EU as crisis boils," POLITICO, 09 November 2021)
THE CZECH REPUBLIC
Fiala accepts the mandate to form a new government
Milos Zeman, the ailing Czech president, invited the leader of the SPOLU (Together) Coalition Petr Fiala, to form a new government putting an end to the political uncertainty following the Czech elections. The mandate, which was made public in a press statement from Zeman's office, signalled the beginning of the ousting of Prime Minister Andrej Babi's turbulent term. On 09 November, Fiala accepted the mandate to form a new government, stating that he would begin negotiations with coalition partners. SPOLU won a victory over Babis' ANO party and signed a coalition agreement with the Pirates and STAN parties. After finalizing the new form of government, the three-party led coalition will have a majority of 108 MPs in the Chamber of Deputies. (Siegfried Mortkowitz, “Czech president taps Petr Fiala to lead new government,” POLITICO, 09 November 2021)
IRELAND
"Contingency plans" underway fearing EU-UK trade war
On 09 November, Irish Deputy Prime Minister (Tanaiste) Leo Varadkar announced that Ireland was making 'contingency plans' in case the UK was to trigger Article 16 of the Northern Ireland Protocol. Varadkar maintained that the EU would be forced to retort to "rebalancing measures" such as suspending the Brexit trade deal, if such an event were to take place. On 08 November, the Irish cabinet sub-committee discussed the said preparations. Considering the possibility of a trade war between the UK and the EU, Varadkar said: "I don't think anybody wants to see the European Union suspending the Trade and Cooperation Agreement with Britain." Stormont's Deputy First Minister Michelle O'Neill had previously requested the UK to back down on its threat to trigger Article 16. Following Varadkar's announcement, O'Neill said: "I warned the government against the language they're using… What we need to find is solutions and stability, certainly not another period of instability." The EU-UK negotiations are in their fourth week but a de-escalation of tensions is seen as unlikely. (Jayne McCormack, "Brexit: Ireland making contingency plans for UK move on Article 16," BBC, 09 November 2021; Shawn Pogatchnik, "Irish 'making preparations' for possible EU-UK trade war," POLITICO, 09 November 2021; Lisa O'Carroll, "Ireland starts making contingency plans for UK trade war with EU," The Guardian, 09 November 2021)
NORWAY
Attacker carrying knife shot in Norway
Police in Norway have shot dead a man threatening passers-by with a knife. Egil Jørgen Brekke, Senior Police Chief explained that the incident has not been declared terror related yet. The police declared the act to be a standalone act. Initially suggesting that passers-by were injured, the police later confirmed that only one police officer was slightly injured. Prime Minister Jonas Gahr Store said he understood the sentiments of the people in Oslo and described the city as a safe one among the other larger cities in Europe. After last month's bow and arrow attacks, this is the third standalone attempt at harming innocent passers-by. The police refrained from revealing more details owing to the customary investigation by the Norwegian Bureau for the Investigation of Police Affairs, when police officers using firearms are involved. ("Norway police shoot dead a knife-wielding man threatening passers-by in Oslo," ABC News, 10 November 2021)
MIGRATION
EU blames Lukashenko of 'gangster-style' tactics; Morawiecki accuses Putin to be 'enabler'
On 09 November, Polish officials closed the border crossing after increased tensions at the Polish-Belarus border. Polish Prime Minister Mateusz Morawiecki tweeted: "Sealing the Polish border is our national interest. But today the stability and security of the entire EU is at stake." In an emergency session of the Polish parliament, Morawiecki accused Putin's involvement in the migrant crisis. He said: "This is the latest attack of Lukashenko, who is an executor, but has an enabler, and this enabler is in Moscow, this enabler is President Putin, which shows a determination to carry out the scenario of rebuilding the Russian empire, the scenario that we, all Poles, have to forcefully oppose." However, Belarus denied the allegations against them as Belarusian President Alexander Lukashenko stated: "I am not a madman, I understand perfectly well where it can lead… We understand, we know our place. But we will not kneel." Russia also responded to the crisis with Kremlin spokesperson Dmitry Peskov stating that their priority was the "lives and health" of the migrants while Foreign Minister Sergei Lavrov suggested that Belarus be financially aided to stop the migrant inflow. Meanwhile, the European Commission is considering imposing further sanctions on Belarus. On 08 November, the member states also agreed on suspending an EU-Belarus visa facilitation agreement. ("Poland seals Belarus border crossing in migrant standoff," Deutsche Welle, 09 November 2021; Daniel Boffey and Andrew Roth, "EU condemns Belarus's 'gangster-style' tactics in Polish border crisis," The Guardian, 09 November 2021; Zosia Wanat, "Poland blames Putin for instigating border crisis," POLITICO, 09 November 2021)