Clean and Fair Trade in Steel, Aluminum a Heavy Lift, Panelists Say
A trade lawyer who has represented steel companies in trade remedy cases said that he is concerned that the proposed green standards for steel will not be as effective in preserving the American steel industry's market-based foundation, because foreign firms will subsidize overcapacity in the name of shifting from higher carbon-intensity mills to more environmentally friendly ones. Alan Price, who chairs Wiley Rein's trade practice, was one of three panelists on a Feb. 24 Washington International Trade Association webinar on "Fair and Clean Trade in Steel and Aluminum."
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Price said that although Chinese subsidization of uneconomic steel production is the root cause of the industry's woes, other countries then subsidize their steel production to keep it alive in the face of lower prices due to Chinese exports. "We see that throughout the steel industry," he said. He also said that protecting the environment "is a constant excuse for subsidies," including in China. He also said that Canada and Europe are offering government money to convert mills to electric arc furnaces. He complained that Canada is increasing production at one conversion site, and said it was driven by politics.
He said U.S. steel is the cleanest in the world because it is dominated by using steel scrap to produce new products. "It achieved this with minimal subsidization," he said. He said it's possible that the first stage of cap and trade policies in Europe, which granted credits to heavy industry, slowed Europe's transition to cleaner steel production.
As more steel production is based on the less carbon-intensive repurposing of steel scrap, Price said, government officials must watch countries' scrap policies, and what he called "raw material hoarding." He said that he's concerned that European shipment regulations "may be a hidden subsidy."
Julia Nielson, deputy director for trade and agriculture at the Organization for Economic Cooperation and Development, said that there needs to be scrutiny of subsidies that claim to encourage better environmental practices. "Is it actually having the impact that we think?"
Several panelists said that if there were better rules on industrial subsidies at the World Trade Organization, it would help, but also expressed pessimism that it can be achieved. Nielson said the rules should ideally prevent subsidization, reduce what's already in place, and require transparency about subsidies. "Subsidies is a growth industry. Some of those reasons have some legitimate basis, but how and when you intervene really matters," she said.
Buddy Stemple, the chairman of the Aluminum Association, said that China now produces about 60% of the world's aluminum, and said that antidumping and countervailing duty actions in the U.S. are treating the symptoms of those distortions but not uprooting them. Still, he said AC/CVD actions have given the U.S. aluminum industry the room to invest.
Both Stemple and Price said that there are roles for the U.S. government to play in a green transition, including supporting research and development into technologies that are not commercially viable that could reduce the carbon intensity of metals production. They also said funding for moving the grid away from fossil fuels without overlying on intermittent power is needed. "Truly, this is not a fast-moving solution," Stemple said.
Similarly, Price said that while he likes the idea of the U.S. and European Union cooperating to address sustainability in the sectors, he said the two-year schedule is awfully ambitious when they haven't yet established the fundamentals. "What is a measure of carbon intensity and what should they be using? Then the next question is: What do we want to do to promote sustainability? Are we going to have carbon border adjustment measures or not as part of this?"
He said a carbon border adjustment tariff is critical to protect cleaner production from dirty imports, but he has a hard time figuring out how it could be done within the WTO rules.