Russia: Agreement Reduces Steel Exports To U.S.

Radio Free Europe ^ | 23-02-99 | Robert Lyle

[Jeremy_Bentham]

Russia: Agreement Reduces Steel Exports To U.S.
By Robert Lyle

Washington, 23 February 1999 (RFE/RL) -- In a decision that could have a large and long-term impact on its economy, Russia has agreed to reduce by almost 70 percent the amount of steel mill products it sells to the United States.

U.S. Commerce Secretary William Daley announced the deal late Monday, based on three tentative agreements reached only hours earlier between his department and the Russian Ministry of Trade:

Daley said the first agreement is to suspend the hot rolled steel dumping investigation in favor of a three-part deal -- a six month moratorium on all imports of Russian hot rolled steel, an annual quota after that, and a minimum price for Russian steel sold in the U.S. The six-month moratorium is intended to offset the recent surge. As a result, total 1999 Russian hot rolled steel imports will be less than 345,000 tons, a 90 percent reduction from 1998 levels.

It was that surge of over 4.7 million tons of Russian steel into the U.S. at extremely cheap prices in 1998 that set off the chain of events leading to the agreements.

U.S. steel companies and labor unions filed formal complaints last September that Russia, Japan and Brazil were dumping -- or selling their steel at below the cost of production -- on American markets. The Commerce Department, in a preliminary finding last week, said that Japanese and Brazilian steel had been dumped in the U.S. It is now up to the International Trade Commission (ITC) to decide if U.S. firms were hurt by it and if retaliatory duties will be levied.

Russia didn't wait for the finding, however. Moscow officials immediately approached Washington and asked to negotiate a framework for steel sales to the U.S. to satisfy both countries.

Russian officials knew that the devalued ruble made their steel extremely cheap for U.S. dollars and the rush of exports to American markets was a windfall for them. But they also knew U.S. producers wouldn't sit still for this, so they asked for an agreement. After all, they argued, steel makes up seven or eight percent of the entire Russian economy and is essential for the country's ability to survive.

The talks were kept secret and only revealed last week when the U.S. made the preliminary determinations of dumping against Japan and Brazil, but postponed on Russia.

The Russian agreements, which must now go through a review process before being finalized, will allow Russian steel to avoid American import duties that could have reached as high as 200 percent, imposed retroactively onto any steel sold in the U.S. starting last November.

Overall, Daley said, the U.S. and Russia have agreed to a ceiling on imports of Russian steel:

Daley said the second agreement is a comprehensive one to restrict the exports of Russian steel to the U.S. Russian steel products are restricted to approximately 1997 levels, including a broad range of 16 steel products such as cold rolled, galvanized and wire rod. The comprehensive agreement, he said, will provide relief for American steel companies and workers.

Daley told reporters that the agreements were necessary because the U.S. had to be protected against a flood of cheap imports. But, he said, Washington did not want to, in his words, "bring Russia to its knees," either. So, after the six months moratorium, up to 750,000 tons of Russian steel will be allowed into the U.S. per year, at prices of between $255 and $280 per ton.

To try to avoid such problems in the future, the U.S. and Russia also signed a memorandum of understanding under which the Commerce Department will assist the Trade Ministry in conducting training seminars on the problem of dumping and in developing monitoring systems.

Depending on the review process, Daley says the agreements could be finally signed by the end of March.

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[Jeremy_Bentham]

Considering recent events, this old article might prove interesting and enlightening.

[Shermy]

Good find. Glad to see Russia and U.S. cooperating.

[fire and forget]

Good post, even if it is antiquated. Russia's new leadership has proven incredibly foresighted and has brought about a virtual renaissance to Russia's economy. I've wanted this for many years, both for our sake and the world's, as well as theirs.

[Stavka2]

Of course, now how does this help Russian companies who are no longer selling goods in the US? It helps the US, yes, it does damn nothing for Russia.

[fire and forget]

I considered the same thing. Seems from the article that a practice of dumping was taking place. Had Russia done nothing (not anticipated the consequence of this), the US likely would have banned or punitively tariffed Russian steel exports for a prolonged period of time. On the face of it I see no reason why our receiving cheap steel from Russia could be a problem (or why it wouldn't be a benefit to all parties), aside from the tougher competition it would bring to our own steel manufacturers.

I'm no fan of government protectionism; let the markets decide the fates of companies and industries. But neither am I familiar with the reasons or the outcome of the events given in the post. In any event, my hat's off to Putin and his cabinet for so dramatically improving Russia's economy and the lot of its people who've suffered so long and unnecessarily.

[Free the USA]

Check the Bump List folders for articles related to and descriptions of the above topic(s) or for other topics of interest.

[Jeremy_Bentham]

One of the reasons that I posted this was to show the mischaracterisation behind the reasoning for protectionist tariffs, ie, "dumping," and why Russia might be legitimately disconcerted by the actions of the US.