The European Commission announced the start of the review process for the Safeguard Measure (SAFE009R5) on 17 December 2021. What are the backgrounds? Why has the review procedure been initiated now? And how does the process work? We answer these questions here.
What is the main reason: changes to the US Section 232 measures.
This may have come as a surprise to some, as normally a review would not have been on the usual schedule until early 2022. But since the European Union and the United States had agreed on a settlement of the steel dispute and reciprocal punitive tariffs at the end of 2021, the EC had to initiate the procedure earlier.
Because of the not insignificant adjustment of the economic situation and the permission to export more than 3 million tonnes of steel to the United States via a tariff rate quota, the Safeguard Guidelines call for an immediate review of the measure.
Recital 85 of the Safeguard extension of 24 June 2021 states that:
“An immediate review of the safeguard measure will also be triggered if the US introduces changes to its Section 232 measure on steel that may have a significant impact on the unduly diverted trade flows it currently generates.”
Case Safe009R4 – Steel products (certain)
What else is reviewed?
Of course, the European Commission is not only reviewing the expected main reason, the adjustment of the Section 232 tariffs in the United States, but also all the other points that would have been pending anyway.
Allocation and management of tariff quotas
The Commission is reviewing the use of tariff quotas for steel and trying to establish patterns in this respect. On the basis of the available data, adjustments will then be made accordingly.
Since certain countries, such as India, often massively overbook their Safeguard quotas on the first day of a new quarter, adjustments could be made here.
Displacement of traditional trade flows
The Commission will review whether traditional trade flows have been subject to an inappropriate displacement process in the last year and whether a specific adjustment needs to be made here.
Updating the list of developing countries with WTO membership
The EC will check whether a developing country with WTO membership has made inappropriately high imports into the EU.
Degree of liberalisation
With the extension 2021, the EC has reduced the degree of liberalisation of steel imports from 5% to 3%. The review will also examine whether this degree of liberalisation needs to be adjusted.
Further changes in circumstances
In addition, the EC is reviewing all other circumstances that could lead to an adjustment of the Safeguard measures.
How does the Safeguard Review process work?
First of all, this is only a review of the EU Safeguard measures on imports of certain steel products, limited to the areas mentioned.
As a first step, interested parties now have the opportunity to submit written comments to the European Commission by 10 January 2022. After that, the procedure will proceed as usual with submissions, mutual allegations, claims and evidence.
When is the review due to be completed?
The Safeguard review is due to be completed no later than 30 June 2022.
Could Safeguard end in 2022?
What is already clear is that the EU Safeguard measures will in all likelihood not end with the review. The Section 232 Tariffs, except with the amendment of a TRQ for Europe, have so far remained unchanged. And after the serious miscalculation in the Safeguard extension that we uncovered, and the quiet and surreptitious change in the figures and subsequent watering down of the rationale, it is obvious that Safeguard is currently a purely political tool.
EU would weaken itself with Safeguard repeal
For the Europeans, a repeal of Safeguard would weaken their position vis-à-vis their negotiating partner, the USA, and other steel-exporting countries, such as China or India. Especially in view of the conflict with China, an end to Safeguard is unlikely.
Major steel powers threaten Fortress Europe
Furthermore, major steel powers such as India have announced their intention to challenge China as the world’s largest steel producer. The EU’s opposition to this is obvious from the imposition of anti-dumping measures and the anti-subsidy proceedings against Indonesia and India, which are now nearing their end. The countervailing duties that are likely to come are likely to lead to quite a bloodbath. On the other hand, this should also allay some people’s fears of a wave of cheap imports from these countries.
We do not believe that efforts to bring Safeguard down through legal action would be very effective or promising at the moment.
Read also:
- EU Safeguard Measures: Calls for immediate end grow louder
- Settlement of the steel tariff dispute by November 1, 2021?
- CBAM: How to sell new steel tariffs with green hydrogen utopias
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