World Entered a Steel Trade War

Responding Bush administration`s decision to impose high rate tariffs on steel imports, including Korean steel imports, most of the trading partners declared their intentions to take the U.S. to the World Trade Organization (WTO) and to take bilateral retaliatory measures. The world is likely to enter a `trade war.`

Mr. Bush`s safeguard action shows that multilateral trading order can be collapsed by the U.S. Republican government`s national industry protection policy. This policy may spread beyond steel industry, such as automobiles, a major export item of Korea, and intellectual property rights.

The Ministry of Foreign Affairs and Trade (MFAT) announced yesterday that, “Selling 15 percent of the steel exports to the U.S., Korea will be affected severely. We will take all possible actions, including appeal to the WTO. Current difficulties in the U.S.` steel industry, which caused the safeguard action, is due to the delay of restructuring. The government will try to have a deliberation with the U.S. government according to the `safeguard agreement` before the imposition of tariffs. At the same time, we will cooperate with the E.U. and Japan.”

Pascal Lamy, the European Commision`s top trade official, said, “The U.S. decision obviously violates the WTO rules, and we will immediately appeal to the WTO.” Japan also severely blamed that, “The decision is a definitely wrong action. ” Russia warned that it would ban imports of American poultry, chicken and turkey, as a retaliation to the safeguard action.

In advance, U.S. President George Bush decided Tuesday that the U.S. government will impose the tariffs of 8-30 percent on 14 types of imported steel exercising the section 201 of the U.S. trade law.

The decision was made in response to the requests of the U.S. steel companies, the Congress, and the International Trade Commission (ITC). Mr. Bush exempted steel made in Mexico and Canada, the members of the North America Free Trade Agreement (NAFTA), and some developing countries from the high rate tariffs.

Paying already 1-5 percent of tariffs, Korean steel industry expects that, if the safeguard action launches, Korean steel will be imposed up to 35 percent of tariffs, and about 60 percent of Korean steel exports to America, 1.2 million ton ($ 564 million), will lose competitive power.

Meanwhile, the damage would be reduced a bit because Bush administration has set aside 120 days of the `item negotiation` period and decided to give an exception on the Pohang Iron and Steel Co.`s hot-rolled steel plates that are exported to its U.S. joint-venture company.

Rae-Jeong Park ecopark@donga.com · Ja-Ryong Koo bonhong@donga.com · Ki-Heung Han el