Expressing great discontent over U.S. President George Bush's decision to impose 8-30 percent safeguards on Korean steel imports, the Korean government said yesterday that it will consider taking the United States to the World Trade Organization (WTO) to battle the "unfair" safeguard measure.
"We regret the U.S. government's judgment very much and have full plans to take it to the WTO if the post-decision negotiations don't produce a satisfying conclusion," Park Sang-ki, director-general of the Bilateral Trade Bureau within the Ministry of Foreign Affairs and Trade (MOFAT), said during a press briefing yesterday.
The same intention was also expressed by Trade Minister Hwang Doo-yun and Minister of Commerce, Industry and Energy (MOCIE) Shin Kook-hwan in separate meetings.
"We believe this action violates the steel industry and WTO's views of free trade and plan on dealing with the issue through the WTO, if we have to," Shin said.
The WTO lawsuit will have to wait, however, as the United States has left some room for negotiations, the ministry said. The Bush administration has set aside 120 days during which its trade partners may request exclusions on tariffs for particular products.
"With this offer for talks, we can't consider the WTO lawsuit yet," Park explained.
Eager to enter post-decision negotiations, the ministry already put in a request with the U.S. government to arrange a meeting with appropriate trade officials last month. It plans on asking the U.S. government to reconsider its rates for a number of products, particularly flat steel items, Park said.
The government also said it would cooperate with other countries like the members of the European Union and Japan in fighting the U.S. decision. The EU and Japan are among a long list of markets critical of the U.S. safeguard, including Canada, Brazil and Mexico.
The Bush administration announced Tuesday that it will slap 8-30 percent tariffs on 14 steel product categories, which is lower than the 40 percent that the U.S. steel industry and the sector's labor unions demanded, but higher than the 10-20 percent that the International Trade Commission (ITC) recommended earlier this year.
The Korean government and industry representatives described these rates as "excessive," considering Korea has been more than cooperative in controlling production amidst global oversupply and seeing through self-initiated industrial restructuring.
"We are very shocked by this high rate of tariffs," said Kim Sung-woo, trade representative within the Korea Iron & Steel Association (KOSA).
"In our key export product like hot-rolled steel plates, especially, we should be paying zero percent tariff," MOFAT's Park said.
Under current regulations the tariff for hot-rolled steel plates - along with five other products in the category like cold-rolled steel plates, corrosion-resistant plates, plates, tin mills and slabs - is at 30 percent the first year, 24 percent in the second year and 18 percent in the third.
The U.S. has tariff rates for bar and section steels (rebar, hot-rolled bar, cold-rolled bar) at 9-30 percent, steel tube (welded pipe, flanges) at 7-15 percent and stainless (wire, bar and rod) at 6-15 percent.
The damage that will result from these rates is not clear yet, the trade ministry said, as detailed analysis of the market is not currently available.
According to reports, Korea exported $6.7 billion worth of steel products last year, of which $1.1 billion (about 15 percent) went to the United States. Exports of the 14 products on the U.S. tariff list are said to make up about $600-700 million.
On the positive side, the United States decided not to tax hot-rolled steel plates from Pohang Iron & Steel Co. (POSCO), as most of its $100 million worth of exports are supplied to UPI, its U.S. joint venture partner.
POSCO is seeing some damage in the stock market, though. Its stock price rose to 160,000 won per share Feb. 22, but dropped to 130,000 won as of yesterday morning. Some analysts predict that the fall in local steel companies' stock prices will continue through the end of the second quarter, before the market picks up again in the third.
Meanwhile, many are expecting a full-fledged trade war on an international scale following the U.S. announcement and the worsening of steel market conditions in general. As exporters will rush to EU and Southeast Asian markets to make up for losses in the United States, industry observers also expect oversupply problems in those countries.
Others further forecast that the ongoing negotiations among the OECD members to cut steel production by about 130 million tons by 2010 will also cease with the new conflict.
The EU and Japan have already announced their intentions to take the United States to the WTO, and Russia said that it would stop importing poultry products from the country.
The Bush administration began investigations on steel imports in June of last year as a way of aiding the ailing U.S. steel industry, using a provision of U.S. trade law known as Section 201, which allows for protections against import surges.
Since a surge of foreign imports began in 1998 as a result of the Asian crisis, more than 30 steel companies have filed for federal bankruptcy protection.