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December 19, 2002

JOINT STATEMENT OF NAFTA GOVERNMENTS:
COMMITMENT TO TAKE ACTION TO ADDRESS PRACTICES THAT DISTORT STEEL MARKETS

The global steel industry should be one in which free-market principles determine both the production of steel and the manner in which steel is sold to users. However, the international steel industry has historically been characterized by government support and distorted markets, leading to cycles of oversupply, depressed prices and profits, injured producers and the inevitable increase in trade actions.

Since 1994, the member countries of the North American Free Trade Agreement (NAFTA) have recognized the benefits that accrue from an open, integrated steel market. By adopting an ambitious schedule to reduce and eliminate tarif and non?tariff barriers, NAFTA countries have demonstrated confidence that the free movement of steel within North America leads to greater stability and integration of our steel markets, healthy competition among our producers, and advantages to steel users in price, quality and supply.

The North American steel market has few permanent trade barriers and NAFTA steel producers receive relatively little government subsidization. Consequently, the North American market is one of the most open in the world. The three countries, therefore, have much to gain from progress in eliminating distortions in steel markets globally.

While governments of steel-producing nations cannot and should not be expected to resolve all of the competitive difficulties that the international steel industry faces, they have a mandate from their respective steel producers and users to address distortions in the steel sector, particularly those resulting from government intervention. The OECD High Level steel exercise has now reached the stage at which general discussion must progress to commitments to address specific problems. As urged by the representatives of not only the North American steel industry but also steel industries in other parts of the world, this work should focus on issues for which there is support among participating countries and which have been identified as particularly market-distorting.

North American Declaration on OECD High Level Process on Steel

To this end, NAFTA Member Governments call on all steel-producing countries to constructively engage in the OECD High Level Process on Steel by beginning to take concrete steps to address the adverse effects of government intervention in the global steel industry. In particular:

1) NAFTA Governments endorse the development in the OECD of approaches for significantly strengthening multilateral disciplines on government market-distorting practices that adversely affect the steel sector. At the outset of the OECD High Level Process on Steel,all three NAFTA Governments and many other governments identified government subsidization as one of the most trade-distorting practices in the steel industry. Because a consensus already exists among steel-producing countries and their industries on the need to strengthen subsidy disciplines, NAFTA governments call for further consideration of the proposal on subsidies tabled by the United States at the September 2002 meeting to the OECD Steel Disciplines Study Group. This proposal calls for the prohibition of all subsidies to the steel sector that promote the maintenance of inefficient capacity, with the possible exception of carefully circumscribed assistance linked to permanent capacity closure, such as assistance to facilitate worker adjustment and/or covering other social and environmental costs incidental to permanent capacity closure. NAFTA Governments agree that the specific elements of this approach to strengthen steel subsidy disciplines should be developed in the first half of next year, bearing in mind the High-Level Group’s previously expressed interest in the possibility of feeding the results of work into ongoing WTO negotiations.

2) NAFTA Governments urge other OECD participants to consider commitments in regard to other practices that distort steel markets. For example, participants should agree that enhanced cooperation and, where appropriate, action by their respective competition/antitrust authorities is needed to ensure that anti-competitive conduct is properly countered, consistent with participants= own laws and policies. Participants should also seek to expand participation in the Azero-for-zero@ steel tariff elimination initiative of the WTO, refrain from the use of export credits for steel plant and equipment in circumstances where there is substantial excess global steelmaking capacity, and coordinate efforts to oppose the extension of multilateral development bank financing for any proposed steel plant projects which would contribute to the expansion of global steel capaity. Other issues deserving of consideration include preferential access to financing and steel production inputs, technical standards, and other non-tariff measures.

3) NAFTA Governments recognize the desire of many participants in the OECD High Level Process on Steel to explore proposed mechanisms to facilitate the closure of non-viable steel capacity. Among the proposals that have been put forward by other participants are ideas to facilitate financing by both state and international financial institutions, as well as the private sector, in order to assist eligible countries/companies in the permanent closure of certain steel capacity. NAFTA Governments would welcome a thorough consideration of the feasibility of these and other options to close excess global capacity in steel.

4) Finally, NAFTA Governments call for continued efforts to enhance the quality and accuracy of steel capacity data and the OECD Apeer review@ process. This will require the full participation of all steel-producing countries in providing on a timely basis complete information on developments and forecasted capacity changes in their respective steel industries.

North American Statement of Principles on Steel

To demonstrate their shared commitment to addressing market distortions in the steel sector, NAFTA Governments have agreed to begin work immediately to develop a Statement of Principles on Steel. This Statement will identify areas in which the three governments will work together to seek greater openness in the North American steel market, and will detail an action plan to that end. In so doing, the NAFTA Governments will take account of the progress made by countries outside of NAFTA to address their own market distorting measures and practices, and will work together to encourage further progress by those countries. It is intended that this Statement will demonstrate the commitment of the three Governments to taking action against distortions in the NAFTA steel market and could serve as a model for te OECD process and other multilateral efforts.

North American Steel Trade Committee

The NAFTA Governments have also agreed to establish a NAFTA Steel Trade Committee to give effect to the Statement of Principles on Steel, to continue cooperation on the successful conclusion of the OECD process and other multilateral efforts, and in recognition of the importance of maintaining an open steel market within North America. This Committee will be a consultative mechanism that will provide a forum for regular exchanges of information and views, for reviewing progress and for developing possible approaches to problems.

Specifically, the Committee will:

  • Ensure the effective implementation of the Statement of Principles;
  • Seek approaches and responses, where appropriate, to emerging problems and issues, including in the context of multilateral and regional discussions on steel trade issues;
  • Exchange information on the North American steel market and trade, to maintain a sound understanding of the nature of steel trade within North America and between North America and other countries;
  • Anticipate and analyze emerging problems in North American trade in steel and seek mutually beneficial solutions; and
  • Consult on government policies and activities in the steel sector that may have an impact on trade in steel.

This Committee will operate with the objective of maintaining open markets, consistent with the rights and obligations of the NAFTA and WTO.

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