WORLD TRADE
ORGANIZATIONTN/RL/W/24
16 October 2002
(02-5622)
Negotiating Group on Rules Original:  English
SUBMISSION BY THE UNITED STATES
The following communication, dated 15 October 2002, has been received from the Permanent
Mission of the United States.
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The United States provides the attached paper for the information of other WTO Member
delegations participating in the Rules Negotiating Group.  The Doha Ministerial Declaration calls fornegotiations on WTO Rules to clarify and improve disciplines under the Agreements on
Implementation of Article VI of the GATT 1994 and on Subsidies and Countervailing Measures,
including disciplines on trade-distorting practices.  The attached paper relates to this specific aspect of
our negotiating mandate.  It presents a number of ideas and recommendations for addressing trade-
and market-distorting practices in the steel sector which, in the view of the United States, meritbroader discussion and consideration in the Doha work programme.  The United States recently
submitted this paper to the Disciplines Study Group of the OECD High-Level Process on Steel Issues,
and is now sharing it with this Group in the interests of transparency.  We look forward to providing
further information and background to other Members concerning this submission and the relevant
work that has been under way in the OECD.TN/RL/W/24
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For Official Use           SG/STEEL (2002)23
Organisation de Coopération et de Développement Economiques
Organisation for Economic Co-operation and Development
__________________________________________________________________________________
English – Or.  English
DIRECTORATE FOR SCIENCE, TECHNOLOGY AND INDUSTRY
OECD Special Meeting at High-Level on Steel Issues
ADDRESSING MARKET DISTORTIONS IN THE GLOBAL STEEL SECTOR
SUBMISSION BY THE UNITED STATES TO THE DISCIPLINES STUDY GROUP12-13 September 2002
Wolfgang Hübner Head of Division of Transport and Steel Unit
Tel:  + 33 1 45 24 91 23  Fax:  + 33 1 44 30 62 63  E-mail:  wolfgang.hubner@oecd.org
Document complet disponible sur OLIS dans sons format d'origine
Complete document available on OLIS in its original formatTN/RL/W/24
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ADDRESSING MARKET DISTORTIONS IN THE GLOBAL STEEL SECTOR
Submission by the United States to the
Disciplines Study Group of the
OECD High-Level Process on Steel Issues
Introduction
In September 2001, participants in the High-Level Group (HLG) agreed, inter alia , “to
identify the principal economic, social and regulatory issues that are impeding, or could impede,
closure/reduction of [economically unviable] capacity and consider policies to facilitate thereduction/closure of inefficient facilities via market forces”.  Subsequently, the HLG established the
Disciplines Study Group (DSG) and requested that it:
· establish an inventory of measures that distort markets;
· examine which of the existing multilateral disciplines do not appear to be achieving the
desired results in the case of steel and why;
· analyze areas where progress toward strengthening disciplines could be achieved;
· explore the scope for a political commitment by participants to voluntarily limit or, where
possible, eliminate market-distorting government measures related to the steel industry,
except for the purpose of facilitating closures; and
· develop options for the strengthening of disciplines on government interventions and other
market distortions in steel, feeding the results, as appropriate, into wider-ranging discussions
at the WTO.
Meaningful work has been pursued on all of the above elements of this mandate, and the
Secretariat has produced an options paper for the September 12-13 DSG meeting
(SG/STEEL/(2002)21) which extensively addresses these issues in an integrated fashion.  The United
States looks forward to a constructive exchange with other participants on the Secretariat’s draft as apoint of departure for preparing a report and recommendations for the HLG.
Noting that the HLG has pointed to the WTO as an appropriate setting for pursuing better
disciplines on at least some of the market distortions affecting trade in and production of steel, and in
view of the fact that the Doha work program is now under way, the United States believes participantsshould begin now to discuss more concretely how th e results of our work could best be formulated
into a coherent package and transmitted to appropriate fora for serious consideration and action.  It is
with that objective in mind that we offer the ideas and suggestions set forth in this paper.TN/RL/W/24
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Summary of Proposal
1. Objectives of OECD Process :  To be effective, the OECD process need not address
exhaustively each of the conditions, measures and practices that have contributed to steel
market distortions and helped to create or perpetuate inefficient, excess steelmaking capacity.Instead, we should focus on two objectives:
Suggesting what general frameworks or approaches may be best suited for the kinds of
disciplines most appropriate for steel, based on the work we have performed and
discussions we have held.
Promoting the most effective disciplines for the steel sector without prejudging at this time
how the disciplines should be codified or otherwise made effective.
2. Scope of Disciplines : We should address as many of the market-distorting practices as
possible.  Our initial aim should be to impose the strictest disciplines over those practices that
are viewed as the most distortive, while seeking ways to encourage or facilitate market-driven
adjustment.  The issues identified to date  fall into the following main categories:
Subsidies or those measures with a subsidy-like effect;
Other forms of official support;
Anticompetitive behavior;
Tariffs and other market access measures; andFinancial support for closure of inefficient capacity.
3. Existing Fora for Negotiations :  Participants recognize that no single forum can adequately
address the concerns identified and, therefore, agree to pursue an integrated approach to the
issues in reference to work being done in – or within the competence of – the OECD, WTO
and other fora, as appropriate.
4. Coordination Across Fora and Disciplines : It will be important to integrate the various
elements of this initiative to give the overall agenda coherence.  Participants in the High-Level
process would, therefore, agree to create a “Steel Informal Group” (SIG) that would meet
periodically to coordinate on matters relevant to steel.  The SIG would not replace on-going
activities (e.g., the OECD Steel Committee), but would provide an informal setting forparticipants to consult and strategize concerning their efforts to ensure that the goals of this
initiative are being sufficiently and consistently addressed.
Specific Disciplines
The United States agrees with the Secretariat’s observation that subsidies and related supports
need to be among our core priorities.  However, as noted above, we believe that the disciplines must
extend beyond subsidies to address a broader range of distorting practices and measures.  Given the
different types of practices and the fact that the market-distorting nature of some of these practices
may be circumstance-specific or less objectively identifiable, the particular disciplines to beestablished may also have to be less categorical and more conditional or prescriptive than in the case
of subsidies.  We should also be fashioning disciplines with the goal not only of preventing
distortions, but also encouraging restructuring, rationalization and adjustment.  In light of these
considerations, the United States believes that a suitable model or framework for steel might include
the following elements.
Subsidies:   Participants would agree to prohibit substantially all subsidies to the steel sector
except perhaps for assistance that is carefully circumscribed and specifically aimed at promoting
capacity closure and facilitating worker adjustment and covering other social and environmental costsTN/RL/W/24
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incidental to capacity closure.1  Participants would work in the WTO and OECD to pursue effective
oversight mechanisms to ensure that any such ex ceptions do not give rise to circumvention of the
basic discipline intended here.  Work in the WTO could involve, for example, an expansion of
existing subsidies disciplines enforced through the WTO dispute settlement process.  As an initial or
complementary step, participants could also make certain subsidy-related commitments and agree toan OECD peer review mechanism to ensure compliance.
Other Forms of Official Support:   Participants would agree that action is needed on a broad
and varied range of practices covered by the OECD and WTO Agreements, as well as some where no
disciplines currently exist.  For example, the High Level Group may wish to commit on behalf of the
participating governments: (i) to refrain from the use of export credits for steel plant and equipment in
circumstances where there is substantial excess global steelmaking capacity; and (ii) not to supportthe extension of  multilateral development bank financing for any proposed steel plant projects which
would contribute to the expansion of global steel capacity.  Other steps that might be taken in this area
include:
• Addressing – perhaps through strengthened subsidies disciplines – preferential access to financing
and steel production inputs, as well as circumstances in which governments absolve steel firms of
generally applicable obligations;
•
 Addressing bankruptcy procedures and their implications for steel capacity reduction.
Anti-Competitive Conduct : Without prejudice to the ongoing work in the WTO regarding
trade and competition, participants would agree that enhanced cooperation and, where appropriate,action by their respective competition/antitrust aut horities is needed to ensure that anti-competitive
conduct which can give rise to market distortions is properly countered, consistent with participants’
own laws and policies.  Therefore, participants could pledge to (i) vigorously enforce their
competition laws and policies with respect to the steel sector ( i.e., producers, distributors, suppliers,
and trading companies); (ii) assist those in need  of technical assistance with respect to the
establishment and application of a sound competition law and policy; and (iii) cooperate with one
another in seeking correction of anti-competitive behavior having cross-border effects, including
international cartel activity, through use of available consultation provisions and negative and positive
comity instruments.  The OECD’s Committee on Competition Law and Policy and/or Joint Group on
Trade and Competition might be invited to consider how they could contribute to this effort, e.g., by
including a special focus on developments in the steel sector within the context of ongoing or
prospective peer reviews of members’ competition laws and policies.
Tariffs and Other Market Access Measures:    Participants would agree to pursue liberalization
of market access in the steel sector aggressively as part of the Doha negotiations, not only to open up
markets but also to reduce the scope for dumping out of sanctuary markets.  As part of their
contribution to the Doha outcome, participants that  have not already done so would agree to join in
the steel zero-for-zero tariff elimination initiative agreed in the Uruguay Round, as well as focus on
non-tariff measures that impede full liberalization of this sector ( e.g., misuse of multilateral rules on
customs valuation).
Trade Remedies:   Negotiations are already under way as part of the Doha work program to
clarify and improve certain WTO trade remedy rules, while preserving the basic concepts, principles
and effectiveness of those rules.  Trade remedies, such as antidumping, countervailing and safeguard
                                                     
1The EU has had extensive experience in applying a state aids model of this kind; we should
invite the EU and its member states to share with us the benefits and lessons of their own experience.TN/RL/W/24
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actions, are presently among the few tools available to deal with trade and market distortions.  It is
logical to assume that the use of these remedies would decline in conjunction with the elimination of
inefficient excess capacity and distortive trade measures internationally.  Indeed, those who wish to
reduce the frequency of trade remedy actions can best achieve that goal by working to eliminate the
distortions to which such actions respond.  Trade remedy negotiators should, therefore, be affordedthe opportunity as experts to sort out the issues  in their own setting, while we reserve our own
attention for the practices that contribute to the responsive use of these remedies in the first instance.
Moreover, because not all market-distorting practices can be categorically or perfectly identified and
eliminated, there will continue to be a need for recourse to trade remedies, even under the strictest of
disciplinary regimes.
Improved Financial Support for the Closure of Inefficient Capacity:   A credible model or
framework for resolving the systemic and structural problems of the steel industry cannot  rest on the
development of trade and market disciplines alone.  There is a concomitant need for creative
approaches to address certain countries’ lack of financial resources to cover the costs of capacity
closure.  We need to provide responsible incentiv es in order to facilitate and encourage such
adjustment as a complement to the discontinuation of practices that have helped to keep uneconomiccapacity afloat.  Consideration should be given, therefore, to how government or private sector
mechanisms might be designed to offer financial support, in conjunction with country requests for
support from international financial institutions, for the social costs of closure of uneconomic capacity
in transition and developing economy countries.
Conclusion
The United States offers the above suggestions with the recognition that they do not answer
all of the difficult questions that must be faced if a permanent and effective solution to steel’s
structural problems is to be found.  We do hope, how ever, that they prompt serious consideration by
and active exchanges with our partners in the High-Level process, and provide a useful starting point
for formulating a sound set of conclusions and recommendations that will be forwarded to the HLG.
We welcome others’ questions and reactions, as well as the constructive cooperation that will be
required to successfully bring our collective efforts in this process to the next important stage.
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