Trade and Technology Council / Working Group 10  Global Trade Challenges

German Steel Federation

1. Inputs on work strand on challenges from non-market economic policies and practices;

Which specific non-market distortive policies and practices do you consider to pose particular challenges for EU workers/businesses, both across sectors and/or in relation to specific sectors, and why?

The EU is an open steel market, there were and still are neither import duties nor non-tariff trade barriers for the import of steel products. In contrast, many third countries have increased their efforts to create artificial competitive advantages, especially for their domestic steel industry, in order to mitigate for example, the effects of the pandemic at the expense of foreign competitors for their own steel producers. Such state interventions primarily include the introduction or increase of import duties, harassing certification and import licensing obligations as well as "buy national" obligations within the framework of economic stimulus programmes.

At the same time, the steel industry in Germany is increasingly encountering competitors who are seeking significant market share gains through unfair market practices. As a result, German producers have been suffering from aggressive predatory competition for some time - especially from China. The flood of mainly dumped cheap material is overwhelming the absorption capacity of the European steel market. Despite growing losses of such often state-controlled steel companies, steel exports continued to rise in recent years.

In what way do you think the EU and the US could most effectively cooperate to address these specific policies and practices?

As part of the EU-US agreement on the tariff dispute on 31 October 2021, a bilateral declaration announced that a European-US agreement for a sustainable steel industry will be launched in the next two years.

The initiative offers valuable opportunities to make progress in solving the global structural crisis. An alliance would offer a great opportunity to enter into deeper cooperation to combat global overcapacity. Under this agreement, a common strategy should be developed on how, for example, trade defence instruments can be further developed and applied. The EU and the USA have already announced in their joint declaration that in a joint club, access to their own markets must be restricted for countries that do not act in a market-oriented manner and promote the creation and maintenance of overcapacities.

Moreover, the WTO is in urgent need of reform. In various dimensions, the current legal framework of the WTO is inadequate. Thus, within the framework of cooperation, it could be achieved that the Agreement on Subsidies and Countervailing Measures (SCM Agreement) can be reformed. The steel industry supports the proposals of the EU, US and Japan initiative to adjust or expand the list of unconditionally prohibited subsidies and adverse subsidies. The US and EU could develop a joint strategy to accelerate and broaden the content of the reform process.

The US already strengthened its investment screening laws in 2018; the EU first introduced an investment screening coordination mechanism in 2020. The US and the EU should exchange even more on screening criteria and ongoing screening cases, on the one hand to develop 'best practices', and on the other hand to react more quickly in a coordinated manner to risks to national security and to protect critical infrastructure in the transatlantic region. The same applies to export controls. Here, too, a stronger joint approach would be desirable.

Any other priorities the EU and the US should pursue in this TTC work strand on non-market distortive policies and practices?

Since 2018, US measures in the steel sector have been in place under Section 232 (protection of national security). Despite the transformation of the measures against the EU into a tariff quota system, the steel industry continues to see the measures as a protectionist measure by the US and not WTO-compliant. The TTC should be the forum to find a common solution to lift these measures as soon as possible.

2. Inputs on possible work strand on trade and environment issues.

Do you agree that each of items envisioned by the Pittsburgh statement Annex V should be proposed as priorities for EU-US cooperation on trade and environment/climate issues? What should be the order of priority (if any) among those items?

The steel industry in Germany sees (in analogy to the Pittsburgh Declaration) intensive cooperation between the EU and the USA as an important instrument in tackling environmental problems such as climate change, achieving climate neutrality and supporting the transition to a more circular economy.

What should be the concrete actions/exchanges under each of the cooperation items that the EU and the US should prioritize and why?

The aim should be to enter into an alliance between the USA and the EU in which both partners voluntarily commit to ambitious climate protection measures. Within this group, a uniform CO2 price and thus comparable climate protection costs should be created and the danger of carbon leakage counteracted. Within the alliance, compensatory measures such as a CBAM could be dispensed with, while protective instruments would still have to be applied vis-à-vis third countries.

The basic prerequisite for a joint climate club is the creation of a level playing field in the recording and pricing of CO2 emissions. This also includes uniform procedures for measuring and monitoring greenhouse gas emissions at producer level.

Which additional priorities, actions, exchanges do you suggest for this work strand on trade and environment in the Working Group on Global Trade challenges?

Green markets for CO2-neutral materials must emerge as soon as possible. Based on their market volume, the steel markets in the USA and the EU offer a good basis for promoting the formation of lead markets, for example through deeper cooperation in the areas of guarantees of origin, carbon footprints and labelling systems.

Both alliance partners must be guaranteed reciprocal market access to these green lead markets. This includes opening public procurement for climate-friendly commodities on both sides. In principle, the quota system (tariff quotas under US Section 232) for imports of green steel should be lifted for the agreement partners.