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Department of Commerce Releases Steel and Aluminum Section 232 Reports

On February 16, 2018, Secretary of Commerce Wilbur Ross released the Steel and Aluminum Reports undertaken under section 232 of the Trade Expansion Act of 1962, as amended. The Secretary previously sent these reports to the President.

The Recommendation of the Steel Report follows:

  1. A global tariff of at least 24 percent on all steel imports from all countries, or
  2. A tariff of at least 53 percent on all steel imports from 12 countries (Brazil, China, Costa Rica, Egypt, India, Malaysia, Republic of Korea, Russia, South Africa, Thailand, Turkey and Vietnam) with a quota by product on steel imports from all other countries equal to 100% of their 2017 exports to the United States, or
  3. A quota on all steel products from all countries equal to 63 percent of each country’s 2017 exports to the United States.

The Recommendations of the Aluminum Report follows:

  1. A tariff of at least 7.7 percent on all aluminum exports from all countries, or
  2. A tariff of 23.6 percent on all products from China, Hong Kong, Russia, Venezuela and Vietnam. All the other countries would be subject to quotas equal to 100 percent of their 2017 exports to the United States, or
  3. A quota on all imports from all countries equal to a maximum of 86.7 percent of their 2017 exports to the United States

Trump Administration’s “Section 232” National Security Review -- A Case Study in Modern Trade Policy

The basic tenets of trade have existed for centuries: two parties with differing competitive advantages exchange for what they lack and need. 

In the late 18th century, it was our first Treasury Secretary, Alexander Hamilton, who laid the foundations of international trade in terms of the:

  • revenue generating advantage of border tariffs
  • playing trading partners off each other to gain advantage, and
  • ·overseeing one of the first preferential trade arrangements with Britain. 

As economies grew and transportation modernized, the business of trade became more complex

  • systems for resolving disputes evolved as appropriate methods of protecting industries and economies  
    • …efforts to raise duties had the opposite effect of their intentions (think post-WWI Smoot-Hawley).

Today, U.S. trade policy is guided by the Trade Expansion Act of 1962 and the Trade Act of 1974

  • These decades old laws delegate the authority of trade to the President and his Cabinet
    • …they serve as the basis for the US to engage in international trade while affording needed protections for the American economy
      • as long as actions are in compliance with the post-WWII General Agreement on Trade and Tariffs (GATT)
      • later the World Trade Organization (WTO), which was formed in 1995 as the adjudicator of the world trading system. 
  • In 2017, the Trump Administration dusted off the little used “Section 232” of the Trade Expansion Act
    • …it allows the President to impose trade restrictions in the name of national security
    • …President Trump announced parallel reviews of the impacts that imports of steel and aluminum are having on the American steel and aluminum producing industries and
    • …their ability to effectively supply to the U.S. military
    • …The reviews were expected to be completed within six months
      • but enough of a chorus of concern and opposition by the commercial metal consuming industries led the Administration to take a longer and more deliberative approach to the reviews 
  • President Trump has received the reports and has until April to decide whether or not to impose restrictions which could come in the form of higher import tariffs, quotas or a combination of both.

The steel and aluminum industries have learned over the decades how to work closely with the U.S. government.

  • Various trade enforcement rules within the 1962 and 1974 laws are a case in point
    • …they are used to counteract surging imports of primary and semi-finished metal products
      • from countries that use unfair advantages to undercut market conditions  
      • the use of these tools have been very successful
        • the volume of primary steel and aluminum from China – not the only target country, but the primary supplier of concern – is less than 1 percent
        • while the “Section 232” review is another avenue for potential market relief, potential import restrictions that arise will have a greater effect on trade with Canada, Mexico, and Europe than it will with China.

ISRI is supportive of the process, finding it a useful exercise to examine market conditions and understand the dynamics of trade in these important materials. Whatever the President decides could have some down-stream effect on the recycling industry in terms of prices and supply and demand. In comments we submitted last year to the Administration for these reviews, we cautioned about the use of export controls as a response, citing past problems when materials are artificially removed from the global marketplace. Nevertheless, we are tracking this process very closely and will advise membership as to the implications of the President’s final decision.

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