UK And U.S. To Sit Down To Resolve Trump-Era Trade Dispute

As an example of how trade disputes often have little to do with trade, the announcement this week that the US and UK would sit down for talks to resolve the Trump era “trade dispute” over steel and aluminum tariffs serves as a case in point.

Back in March 2018, when the former US president first imposed section 232 import tariffs of 25% on steel and 10% on aluminum imported from nearly everywhere, the UK belonged to the EU. While the application appeared heavy-handed, strong arguments for action existed. Capacity utilization among the US steel industry had dropped to record lows and the industry as a whole had struggled to make a decent return since the financial crisis. But late last year, the EU successfully negotiated the removal of the tariffs in return for a quota agreement with the US.

UK and Europe no more

The UK, however, exited the EU on January 1, 2021, and so could not avail itself of that agreement. In fact, to make matters worse, clauses in the US-EU agreement make trade between the UK and EU harder because the US-EU agreement states steel originating in the UK will still attract the tariffs even if worked on and exported by EU companies.  This has the effect of making its use in components destined for the USA uneconomic for EU manufacturers.

Where does the UK rank?

Naturally, US steel producers remain opposed to any deal. And, likewise for Japan, with whom the US has opened discussions in parallel, arguably the industry has cause for anxiety. Japan ranked 5th in 2020 among suppliers to the US steel market at just under $1bn according to Statista.com. However, the UK doesn’t even feature in the top ten. Nor does it qualify as either a country that does not support free and fair trade or one that has lax environmental legislation. Both of these arguments do not support relaxing imports from countries like China. What the UK does have involves an unresolved thorny problem with the EU specifically, Northern Ireland, and its trade agreement with Eire, a member of the EU.

Possibly because the current President claims distant Irish ancestry, or possibly as a sop to the EU, the current Biden administration has exacerbated tensions in the province over the resolution of the border issues. In addition, the administration has used issues like the steel and aluminum 232 tariffs as a lever that it perceives gives it influence over the EU-UK negotiations. In the meantime, countervailing action by the UK penalizes US exports of various products, some like whisky producers have seen volumes fall, others like Harley Davidson have seen profits vanish.

Too many jobs remain on the line and company futures are at stake for politicians to play games with trade. The UK’s application for equivalent treatment to its European neighbors should address whether any additional UK tons pose a serious threat to US producers. It’s hard to see how it does with the EU industry ten times larger given free reign, but that’s the measure.

By AG Metal Miner

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