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Friday, June 11, 1999 Published at 17:26 GMT 18:26 UK

Business: The Economy

US-Japan steel war escalates

Steel nerve: decision on US tariffs could spark a global trade war

The US-Japan steel war is set as escalate as the US International Trade Commission decides to impose punitive tariffs on Japanese steel imports.
World trade wars

The unanimous 6-0 decision sets the scene for another confrontation between two of the world's major trading partners, who have already clashed many times before.

Nowhere is the verbal abuse of competitors more evident than in the United States, where steel-makers have been clamouring for protection from cheap imports.

The trade dispute comes at a time of rising trade tensions between the United States and Europe over beef and bananas, and a failure of the world community to find a new leader of the World Trade Organisation, which is supposed to regulate disputes.

Allegations of unfair pricing

The American industry - which has a long history of being feather-bedded by the government - has accused Japanese, Russian and Brazilian producers of dumping hot-rolled steel in the US at prices below production costs or home market rates.

[ image: Any old iron: dumping]
Any old iron: dumping
The US Commerce Department ruled in April that Japan had violated trade laws and proposed tariffs as high as 67%.

Now, the US International Trade Commission has decided that the domestic industry is being hurt by Japanese pricing practices, and is entitled to compensatory tariffs.

Tariffs would make Japanese shipments too expensive to sell in the US. American producers wanted them in order to counter the effects of a 400% surge in imports from Japan last year, which they are blaming for thousands of job losses.

[ image: Steel jobs under threat]
Steel jobs under threat
Imports into America began to rise dramatically after the Asian economic crisis, which left the US with the strongest demand.

The government reached agreements with Russia and Brazil on voluntary reductions in steel shipments. But Japan dismissed the idea.

Tokyo said it was America's problem if its steel industry could not compete internationally.

It also argued that it was the high dollar, not predatory prices, that made Japanese steel so cheap.

Costs of adjustment

The US industry has spent $50bn on modernisation in the past 20 years and laid off more than 300,000 employees - almost three-quarters of the workforce.

Its productivity of less than four man-hours per ton of steel is better even than in Germany and Japan.

But a protectionist past has resulted in the US industry being slow to consolidate, while the "big is beautiful" trend has swept the rest of the world.

European moves to increase efficiency

Following the lead of other European steel companies, British Steel and the Dutch firm, Koninklijke Hoogovens, announced a merger last week.

By joining forces, the companies hope to save almost £200m a year, and they also reduce their exposure to trade risks associated with fluctuating exchange rates.

The US industry is pushing for quotas covering steel products from all countries, and is hoping for a vote in the Senate on the issue later in June.

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