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COMMISSION OFTHEEUROPEAN COMMUNITIES
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EXTERNAL ASPECTS OFTRADE INSTEEL
(Commission communication totheCouncil )
C0M(8l )668 final

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CjOMIVJISSIOIM ■ .
OFTHE
EUROPEANCOMMUNITIES
COMMISSION COMMUNICATION TOTHECOUNCIL '
Subject:...EXTERNALASPECTSOFTRADEINSTEEL
1.Backqround
InthemiddleofLastyeartheCommission wasobligedtoacknowledgethatthe
Europeansteelindustrywasinasituationsuchthattheattainmentofthe
.objectivesreferredtoinArticle3oftheTreaty,notablythemodernization
andrestructuring ofproduction,improvedconditionsforworkersandthe
ensuringofanorderlysupplytothecommonmarket,wasingrave-jeopardy.
Inviewofthedropindemandandinproductioncapacityutilizationrates,
thecollapseofpricesandthedeterioration inthefinancialsituationof
steelfirms,andinordertoavoidirreparable damagetothestructureof
theEuropeansteelindustry,theCommissiondeclaredastateofmanifest -
crisis,forthefirsttimeinthehistoryoftheECSC,andintroduced
compulsorymeasures .underArticle58ECSC.
Sincetheconditionsthatledtothedeclaration ofastateofmanifest
crisishavenotchangedappreciably duringthecurrentyear,thecompulsory
measuresadoptedunderArticle58ECSChaveingeneralbeenextendeduntil ..
.30June1982andinadditionhavebeenaccompanied byamuchstricter
disciplineintheareaofpricesurveillance (Decisions1834/81/ECSCand
1836/81/ECSCandRecommendat ion.1835/81/ECSC). ; '
Accordingly,theCommissionproposes,broadlyspeaking,toreintroducefor
1982theexternalmeasuresalreadyinforce.
2.Reminderoftheexternalmeasures /' • /
(a)Functioning oftheexternalinstruments ,',
DependingonwhetherornottheCommissionhasconcludedarrangements with
thenon-membersuppliercountries,importsaresubjetttothearrangements
systemortobasicprices.Bothofthesearebacked-uobyforward "and
retrospective statisticalsurveillance measures.
TheCommissionhasregularlyadjustedbasicpricesaccordingtothe
increaseinproductioncostsinthesuppliercountryorcountries ,
wher§normalconditionsofcompetitionapplyinrespectofsteel
products,orhasamendedthosepricesinaccordancewithexchangerate
changes.Themostrecentamendmentswerepublishedon4Julyand
1Augustthisyear.TheCommissioncanthusverifywhethertheimports-
fromnon-arrangement countriesareJakingplaceunderconditionsof
unfaircompetition .

2-
For1931theCommission hasconcludedarrangements byexchangeofletterswith
14oftheComrr.unity!smainnon-member suppliercountries.Some75%ofImports
arecoveredbyarrangements .Atthebeginningof"theyeartheCommission
apolieda15%reductiontothequantitiesnegotiatedin1980inrespectof
thosepartnerswhosgarrangements specifiedactualquantities.'This15%
rateofreductionw|sthesubjectofapositivecorrectioninthecourse
ofconsultations wifhthepartnercountriesinSeptemberinthelight
•■;inparticularofth^fallinrealconsumption intheCommunitymarket.The
:tommission hasheldregularconsultations withitspartnersinorderto
-:ensurecompliance w<fthalltheprovisionsofthearrangements ;ithas
{alsoconsultedthe(jjjemberStatesattheweeklymeetingsoftheSteelLiaison
Committee onvariousquestionsrelatingtotheadministration ofthe.
arrangements .
Thesurveillance systemhasbeenextendeduntiltheendof1981andbroughtinto
linewiththechangesresultingfromtheconclusion ofthearrangements and-
theirprovisions .Therehavebeenproblemswithregardtocompliance withthe
surveillance systembycertainMemberStates;in,1982theseprovisionswill
havetobeobservedmorestrictly.
b)Effectsofthemeasures
77"~Duringthefirsthalfoftheyearcompliancewiththearrangement pricerules
wasaffectedbythedepressedlevelofprices.Asaresult>this-provision
ofthearrangements wasnotsatisfactorily observedbynon-member country
.exporters,whoareentitledbyvirtueofthearrangements tobenefitfrom
pricesenablingthemtoenterthem'arketviaamarginofpenetration .In
July/August,theCommissioninvitedallthepartnercountriestorespect
thenewsituation asregardspricesORtheCommunitymarketandtocorrect
theirlow-priceoffers.
Itisonlyasaresultofcompliance withthesurveillance systembyall'
theMemberStatesthattheCommissionwillbeabletoverifywhetherthe
partnercountriesarerespectingthatnewsituation.Forthetimebeing,
andonthebasisofincomplete data,acertainimprovement hassince
becomediscernible .
,-Compliance withthebasicpricesonimportation hasnotbeenverysatisfactory .
-Inthisarea,therehavebeennumerouscasesofundercutting formostofthe/
productssubjecttothesystem,includingsemi-finished products,pigiron
andferro-manganese . '
:With,regardtoquantities,therehasbeenabalanceddevelopment ofimports-
.andexportsfromandtotheEFTAcountries;itshouldbenoted,however,
thatforthedetermination ofthequantitative aspectsaccountwastakenof
thetrendaIreadyobservedin1980.Thearrangements withtheabove ,
countries ,includetheprincipleofreciprocity .Fortheotherarrangement
countries,thebeginningoftheyearshowedamarkeddropcomparedwith 'v■
1980,withtheresultthatthereducedquantitiesfixedfor1981willtoa
largeextentremainunused,eventhoughthesecondhalfoftheyearshowed
someincreaseinimports.Thistrendistheresultofthedepressed
situationoftheCommunitysteelmarketin1981.

-3-
ExternalaspectsoftheECSCsteelplanfor1981
(a)Basicprices , '
TheCommissionintendstorevisethebasicpricesattheendofthe
yeartoreflecttheincreaseinproductioncostsandtotakeaccountof
theexchangeratechangesthattookplaceon4October.TheCommission
willhavetoexercisestrictsurveillance in1932oftheimports
subjecttobasicprices.*
Thissurveillance wil-lbepossibleonlyifthenationaladministration-.'
forwardmorecomprehensive information morerapidly.Onlyon'thisbasis
willitbepossiblefortheCommissiontodetectimportsthetarecoming
inunderunfairconditionsofcompetition andtakethenecessarymeasures
TheCommissionfeelsthatinthedetermination of.therangeofproducts
tobecoveredbythebasicprices-andthusbytheexternalmeasures-
consideration mustbegiventotheprosandconsofmaintaining inthe
systemorexcludingferro-manganese andpigiron.Consideration must
-alsobegiveninthiscontexttothestatemententeredintheminutes ,
oftheCouncilmeetingof24November1980CPV.CONS.53-SID168)....
Thethreemaincriteriaarewhethertheproductsarescoveredbythe;
internalmeasures,whetherarestructuring efforthasbeencarriedout-
followedbyanimprovement inthecompetitiveposition andwhether
suppliesareassured. ,• "i
Ferro-manganese andpigironarenotcoveredbytheinternalmeasures.
Withregardtoferro-manganese ,itcanbeseenthatdespitethe
restructuring projectsrecentlycarriedoutnoimprovementisdiscernible
inthecompetitivepositioncomparedwiththisindustryin-non-member
:countries.\ _
Asfarassuppliesareconcerned,thereiscurrentlyover-capacity in
theCommunity,and,intheeventofdifficulties inthefuture,capacity
andproductioncouldbedevelopedrapidly.Thelargestsuppliersat
presentareNorwayandSouthAfrica,andtherearealsootherproducers
offerro-manganese .
InsupportoftheretentionofthisproductundertheexternaImeasures,.
itmust.berememberedthatferro-manganese isanimportantconstituent
inthesteel-making .process..Productioninnon-membercountriesis
beingcarriedoutunderconditionsthatareincreasingly advantageous
comparedwiththoseintheCommunity.Asaresult,importsare.
vprovidinganincreasingproportionoftheCommunitysupply.This
explainswhythissectorisindifficulties intheCommunity,with
adverseconsequences foremployment. ./._
.Thesaiddifficulties arefurtheraggravated bytheveryLowlevelof
activityinthesteelindustry,whichisbeingfirth;rreducedbythe
measuresadoptedunderArticle58ECSCandbytheconsequencesthat
thissituationhashadonthe/pricelevelforthisproductinthe
Community.

-4-
Asregardspiairon,themarketsituationforfoundrypigironhasfor
anumbi.-rofbeencharacterized byconsiderable overcapacity atworld
level.Thisiswhytherestructuring ofthissectorshouldcontinue.
Itshouldbenoted,however,thatfollowingtherestructuring operation
carriedoutintheperiod-1964-70therearenowonlyarelativelylimited
numberoffirmsproducingpigironformarketing (reductionfrom44to
3).Asreoarrlstheeffectiveness oftheexternalmeasuresinpromoting
restructuring ,itcanbeseenthattherehasbeennopositiveeffect.
withregardtosecurityofsupply,itwillbenotedthattheworldmarket
isrelativelylimited.Thetrendinimportsofpigirongivesanerratic
picture.Importsoffoundrypigironaccountforbetween15%and20%of
thepurchasesofnewpigiron.Inrecentyears,moreover,anincreased ,,
regularityofsuppliesfromnon-membercountrieshasbeenobserved.
Assumingthatpigironwasmaintainedinthesystem,onecouldexpect
anincres:,einscrapconsumption infoundriesbecauseof,theexcessive
priceofpigironandthatintegratedfoundrieswouldbeatanadvantage
comparedwithindependent foundries.
Asanargumentinfavourofmaintaining foundrypigironproductionin
theCommunity,referenceshouldbemadetotheneedforregularityofsupplies;
atthesametimeitshouldbestressedthat'marketpenetration increased
in1980.Thedifficulties facedbythissector,particularly fromthe
employmentviewpoint,shouldalsobeborneinmind.
Inanyevent,thetwoproducts-ferro-manganese andpigiron-mustcontinue
tobecoveredbytheforwardsurveillance ofquantities.
Asfarazsemi-finished productsareconcerned,theineffectiveness ofbasic
pricesisclear;theseprodurtsaredirectlyabsorbedbytheCommunity
steelindustryandtheCommunityhasaninterestinobtainingsupplies
atthebestprices.However,inviewoftheconsiderabledifficulties of
theCommunitysteelindustryandtheinterestithasinmaintaining the
system,andinviewofthecrisismeasuresapplicableduringthefirst
halfof1982,themaintenance oftheseproductsinthesystemisforthe
timebeingjustifiable .

-5-
(b)Steelarranqements
'Theexistingarrangements arebasedonuniform-principles ,butare
adapted,informandmorespecifically intheirquantityprovisions,
accordingtotheparticularrelationships thatexistbetweenthe
Communityanditspartnercountries.ThisShouldnotbechanged.
ThemainprovisionsoftheArranaements shouldlikewisebecontinued
withoutchangefor1982.Thefollowingaretheessentialfeatures :
-Anobligationtorespectthepricediscipline
-Communityproducersareforbiddentoaligntheirpricesonprices
offeredbyarrangement countries .
-quantityprovisions
-themaintenance oftraditionaltradeflowswhilerespecting aspacing
ofexportsintime;regionaldistribution andtheproduct-spread of-
exportstotheCommunity .
-theapplication ofbasicpricestoindirectimportsandthecounting
ofsuchimportsagainsttheagreedquantities
theexclusionfromthecoverageofthearrangements oftemporary
,importsforhire-processing ontheconditionthattheownershipofthe
productdoesnotchange
specialprovisionforimportsofsteelforuseinshipbuilding and
repair-yards
consultation clause *
suspensionclause.
Withregardtothefieldcovered,thepossibleexclusionofferro--
manganeseandpigironfrombasicpriceswouldmeantheirexclusion
fromthescopeofthe.arrangements ;eveninthiscase,however,the
Commissionproposesthatt'-eseproductsshouldremaincoveredbythe
consultation clausetoen:.uresomecontroloverthetrendofimports;
theywouldbeexcludedfroi.ithepriceobligations inthearrangements
withthestate-trading countriesbut'wouldcontinuetobecoveredby
thequantitative obligations;thesaidproductswouldremainsubjectto
theforwardsurveillance cfquantities . ...
Asregardsthecountriesconcerned,aneffortshouldbemadetoconclude
arrangements for1982withallthecountriescoveredin1981.Themain
provisionofthearrangement withBrazilwasamutualcommitment (prices
andquantities )forpigiron..Inthiscase,theCommissionisproposing,
shouldpigironbeexcludedfrom,theexternalaspects,anexchangeof
lettersprovidingfor regularconsultations onthetrendofpigironimports,
withouttherebeinganycommitmentoneitherside,andthecontinuation
ofBrazil'scommitment ontheobservanceofbasicpricesforECSCiron
andsteelproducts.

6-
Onthequantitative aspects,thePermanentRepresentatives Committee
wouldbeinvitedtosettheLimitsfor1982afterthematterwasconsidered
intheSteelLiaisonCommittee.Theprinciplesinforcewouldbeapplied:
thenewQuantitiesshouldtakeaccountofthetrendofconsumption in-the
Community.TheCommunitymustfollowtheguidingprincipleoffair
burden-sharing :ontheonehand,Communityproducersmustnotbetreated
lessfavourablythannon-membersupplierstotheCommunitymarketand>
ontheotherhand,non-membercountrieswillnotbediscriminated against
comparedwithCommunityproducers.Aclausewouldbeaddedprovidingfor
consultations inmid-1932atwhichanadjustmentinlinewiththereal -
markett-endwouldbepossibleforthesecondhalfofthatyear.
InIin-i.»twillifiTl.iinp.irlncrcountries,allowancemustbe
uniefortneirspecieIcontractualrelationswiththeCommunity.AccordiniVly,
thearhongements withtheEFTAcountries comewithintheframeworkofthe
free-tr.jdeagreements.Thearrangements withtheEFTAcountries,aswith
Spain,provideforreciprocity .Thatiswhyitisnecessarytomaintainthe
roquUrconsultation arrangements vis-a-visthatcountry.Itshouldalso
berememberedthattheformadoptedinthearrangements withregardtothe
quantitative obligations oftheEFTAcountriesaridJapanwouldmake.it
possibletonegotiateandreachaconclusionwiththosecountriesvery
rapidly. \ f:
AssoonastheforecastsfortheCommunitymarkettrendin1982'areavailable,
theCor,missionwillpresentaproposalonthefigurestobeadoptedto
thePermanentRepresentatives Committee,afterexamination intheSteel
LiaisonCommittee.<Thenegotiations withthepartnercountrieswouldbe.
finalisedonthebasisofthePermanentRepresentatives Committeedecision.
'/ ' - -I'.
Toensuretheproperfunctioning ofthearrangements in1982,alltheforward
.andretrospective provisionsoftherecommendations mustberespectedby ■
theMemberStates;inparticular,notification ofallviolationsofthe:
pricerulesmustbegivenwithoutdelay.
4.Procédure
Thenegotiations withthepartnercountrieswillbeconductedbytheCommission
inagreementwiththeMemberStateswithintheframeworkoftheSteelLiaison
Committee *Thetextsofthearrangements willbesubmitted,beforeconclusion,
tothePermanentRepresentatives Committee,inparticulartoobtainassent
fortheprohibition ofpricealignments.. > -

-7-
5.Commissionproposal
Inconclusion,theCommissionrequeststhattheCouncilgiveits
agreementtothefollowing :
inlinewiththeOECDdeclaration,theCommissionwillproposeto
certaincountrieswhichexportsteeltotheCommunitythat,inorder
toavoiddisturbances ontheCommunitymarket,theyshouldconclude
bilateralarrangements withtheCommunityinvolvingpricediscipline.
Atthesametirr.e,assuranceswillbegivenonthemaintenance of
traditional tradeflows,allowancebeingmade,however,foranypossible
reductioninconsumption foreseenfor1982andalsofortheanti-crisis
measuresinforcepursuanttoArticle58,ECSC,whichexpireon
30June1982. ■
-Assoonastheforecastsforthedevelopment oftheCommunitysteel
jmarketin1932areavailable,theCommissionwillpresenttothe
PermanentRepresentatives Committeeitsproposalsonthequantitative
aspectsofthearrangements withthepartnercountriesforwhichfigures
havetobeagreed,thesaidproposalsfirsthavingbeenexaminedby
theSteelLiaisonCommittee.
-TheCommissionwillreportregularlytotheSteelLiaisonCommittee
onthenegotiations .TheCommitteewillexamineanyquestionsthat
arise,withaviewtofindingappropriatesolutions.
-QuestionsthatcannotberesolvedbytheSteelLiaisonCommitteewill
bereferredtothePermanentRepresentatives Committee.
-TheCommissionwillsubmitthetextsofthearrangements tothe
PermanentReciresentatives Committeebeforetheyareconcluded.
ι