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29 June 2004
Steel Subsidy Talks Switch to Consultations, Group Says
Differences too difficult to overcome in formal setting, OECD suggests
The United States and 37 other countries have decided to shift from formal negotiations to informal consultations in order to narrow key differences preventing them from reaching agreement on cutting or reducing subsidies to the steel sector, an organization of industrialized nations said.
Formal negotiations conducted by the High Level Group under the auspices of the Organization for Economic Cooperation and Development (OECD) have produced a framework for an agreement and a consensus that such an agreement should provide for stricter disciplines on steel subsidies than those included in the existing World Trade Organization (WTO) agreement, the OECD said in a June 29 communiqué at the conclusion of the two-day meeting in Paris.
But participants agreed they need more time and less formal bilateral and multilateral discussions to iron out "significant" differences on key issues and determine how best to advance the talks, the organization said.
A major disagreement reportedly concerns a provision that would exempt environmental and research and development subsidies from imposition of punitive countervailing duties. According to news reports, Canadian, Mexican and U.S. steel makers are against the provision, which is sought by European steel producers. In addition, negotiators reportedly have not been able to come up with a consensus formula for special and differential treatment of developing countries.
Participants also received a progress report about worldwide steel capacity reduction. The objective has been made less urgent by the increase in global steel consumption and rising steel prices, the OECD suggested. Not only has the gap between capacity and production been reduced in recent years but the recent upturn in demand has been fuelling interest in new steel mills, it said. Due to the cyclical nature of the steel market, however, OECD said participants should monitor market conditions and exchange information periodically.
Following is the text of the OECD communiqué:
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Organisation for Economic Co-operation and Development
Communique Issued Following the High-Level Meeting on Steel, 28-29 June 2004
[Paris, France]
29/06/2004 -- Senior government officials from major steel-producing economies (1) convened a seventh High-Level Meeting on steel at the OECD in Paris on 28 and 29 June 2004, to review the status of discussions on a proposed agreement to curtail subsidies to the steel sector. The High Level Group (HLG): i) reaffirmed its interest in reaching an agreement that eliminates or reduces trade-distorting subsidies in steel provided at all levels of government; ii) concluded that, while significant progress towards an agreement has been made, there remain differences among the participants in key areas that require further examination and discussion; iii) urged participants to use the coming months for informal consultations aimed at narrowing differences and advancing the negotiations; iv) requested the OECD Secretariat to consult with participants on the future of the process and to report to the HLG; and v) agreed to meet in 2005 to evaluate prospects for successfully concluding the negotiations.
Recent developments in steel
Participants in the meeting discussed the turnaround in steel market conditions in recent months (2) and received a report by the Chairman of the Capacity Working Group. Growth in global steel consumption had accelerated to more than 6 percent in 2003, with a relatively high rate expected to be maintained in 2004 and 2005. The strongest growth had occurred in Asia, but markets in Europe and North America were also strengthening. The upturn was resulting in increases in demand for raw materials, and was fuelling interest in new steelmaking capacity, which was expected to increase by 15 percent from its 1998 level to 1,248 million tons by 2005. In his report, the Chairman of Capacity Working Group noted that the gap between capacity and production had been reduced in recent years.
Participants agreed that developments in global steel markets and capacity warranted close attention given the cyclical nature of the market and agreed it would be beneficial to meet periodically to exchange information and assess conditions, as they evolve. They hoped that the OECD could continue to provide the forum for such meetings, and expressed the view that these activities should be open to all major players in steel, in particular the participation of those non-OECD members that have been important contributors to the work of the High Level process on steel.
Steel Subsidies Talks
Delegates noted that the Disciplines Study Group (DSG) had advanced work on the elements of an agreement [Elements of an Agreement to Reduce or Eliminate Trade Distorting Subsidies in Steel] that could serve as the starting point for further negotiations. They agreed that the draft text reflects the state of the discussions held to date, and addresses the issues which the HLG had instructed the DSG to consider in its work.
The HLG noted that the DSG had been able to develop a framework, and agreed that the proposed agreement should provide stricter disciplines on steel subsidies than those in the Agreement on Subsidies and Countervailing Measures of the World Trade Organisation, taking into account the needs of the developing economies.
However, the DSG's discussions revealed that there were significant differences in the positions of participants on key issues. These had been explored in background papers prepared for the meeting on Steel Agreement Issues and Ideas for Advancing the Steel Subsidy Talks.
Participants agreed that more time was needed to explore ways to narrow differences, and that it would be beneficial to use the coming months for informal consultations to determine how best to advance the talks. They requested the OECD Secretariat to continue its consultations with participants in order to clarify positions further, and to identify possible ways forward. They asked that the Secretariat report on the results of these consultations to the HLG participants periodically and agreed that the HLG would meet during 2005. The HLG also called for those participants that are WTO Members to avail themselves of opportunities arising within that Organisation to maintain a dialogue on issues relevant to the strengthening of multilateral subsidy disciplines.
The High-Level meeting was held on 28 and 29 June 2004, in Paris, under the Chairmanship of Mr. Herwig Schlögl, Deputy Secretary-General of the OECD. It was the seventh such meeting, with previous sessions held on 17-18 September 2001, 17-18 December 2001, 7-8 February 2002, 18-19 April 2002 and 18-19 December 2002, and 18 July 2003. At the February 2002 meeting, a Disciplines Study Group and a Capacity Working Group were established to support the work of the High-Level Group. At the December 2002 meeting the HLG agreed to initiate work establishing elements of a Steel Subsidies Agreement. Industry representatives have participated actively in the High Level Group's work since its inception in 2001.
(1) Australia, Austria, Argentina, Belgium, Brazil, Bulgaria, Canada, China, Czech Republic, Denmark, Egypt, European Community, Finland, France, Germany, Greece, Hungary, India, Italy, Japan, Kazakhstan, Korea, Mexico, the Netherlands, Norway, Poland, Portugal, Romania, Russian Federation, Slovak Republic, Spain, Sweden, Switzerland, Chinese Taipei, Turkey, Ukraine, United Kingdom, United States.
(2) A short report on global market developments can be accessed on the Internet, at http://www.oecd.org/sti/steel
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(Distributed by the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
