Documents considered by the Committee on 6 June 2018 Contents

12Possible EU countermeasures to US tariffs on steel and aluminium

Committee’s assessment

Legally and politically important

Committee’s decision

Not cleared; further information requested; drawn to the attention of the International Trade Committee

Document details

OTNYR—Commission Implementing Regulation (EU) …/… of XXX

on certain commercial policy measures concerning certain products originating

in the United States of America pursuant to Article 4(1) of Regulation (EU) No 654/2014

Legal base

Regulation (EU) No 654/2014

Department

International Trade

Document Number

(39698),—

Summary and Committee’s conclusions

Overview

12.1On 8 March 2018, the US announced its intention to impose additional 25% tariffs on steel imports and 10% duties on aluminium imports to protect US national security.48 It granted the EU a time-limited exemption from these tariffs—originally lasting until 1 May 2018 and subsequently extended to 1 June 2018. The EU has pressed the US for a permanent exemption, but on 31 May 2018 US Commerce Secretary, Wilbur Ross, stated that the steel and aluminium duties would apply to the EU from 1 June 2018.

12.2The US argues that the tariffs fall outside the remit of the World Trade Organisation (WTO) as they have been imposed in the interests of national security. However, the EU is treating them as commercial safeguard measures (intended to protect US industry from foreign competition for commercial reasons).

12.3The EU is considering its response to the US imposition of tariffs. One potential action involves implementing countermeasures (extra duties) on certain US imports in order to compensate the EU for the harm caused by the US tariffs (pursuant to the WTO Agreement on Safeguards).

12.4The Commission has published the list of US products on which the EU may apply extra import duties49 and notified the WTO of its proposed countermeasures on 18 May 2018. The notification to the WTO does not mean that the EU will definitely implement the countermeasures, but it is a procedural step that will enable the EU to impose them if deemed necessary. If implemented, the first set of countermeasures will apply from 20 June 2018. The second set will apply from 20 March 2021 (or upon a WTO determination of inconsistency of the US safeguard measures).

The Government’s view

12.5The Minister of State for Trade Policy (Greg Hands) shared an “official text not yet received” version of the proposed countermeasures with the Committee in his Explanatory Memorandum of 8 May 2018. As noted above, this document is now public given its publication in the EU’s Official Journal on 18 May 2018.

12.6The Minister states that the “UK Government supports the approach of the Commission and has voted in favour of this regulation”. He considers that “[t]he vote at the Trade Barriers Committee will serve as leverage in negotiations with the US to secure the maximum possible exemption for the EU from the new tariffs” and “…may help deter similar actions” by other countries.

12.7The Minister notes that a further implementing regulation will be required for the countermeasures to come into effect and that the Government “will determine its position on that regulation at the appropriate time.” He stresses the importance of any response being “measured and proportionate” and that it must “work[…] within the boundaries of the rules-based international trading system”.

The Committee’s questions and conclusions

12.8The Committee notes the Government’s support for notifying the WTO of the list of potential countermeasures. Given that the Government has yet to “determine its position” on whether it would support bringing these measures into effect, we ask the Minister to set out what criteria the Government will use to assess whether such countermeasures are necessary and proportionate. Given recent press reports questioning the legality of these retaliatory measures under WTO law we ask also for his analysis on this issue.50

12.9The Minister does not address the implications of these potential countermeasures after UK withdrawal from the EU on 29 March 2019. We ask the Minister to set out the legal and policy framework for the UK in its application and enforcement of international trade rules:

a)during the transition/implementation period (scheduled between 29 March 2019 and 31 December 2020): can he confirm that the first set of countermeasures (which would apply from 20 June 2018, if implemented) will automatically apply to the UK, and if so why (by reference, for example, to the draft Withdrawal Bill);

b)in the event of a ‘no deal’ exit and no transition/implementation period: would the Government be minded to withdraw or continue these EU countermeasures (if in place) and, if so, how? Given recent reports questioning the legality of these retaliatory measures under WTO law, we ask also for his analysis on this line.51 and

c)after any transition/implementation period (scheduled to end on 31 December 2020): what considerations, if any, has the Government given to continuing either the first set of countermeasures (if still in place) and/or applying the March 2021 tariffs after 31 December 2020? What would be the possible impacts on the UK if it were align with or diverge from the EU list of countermeasures?

12.10We ask the Minister to respond to these questions within 5 working days, and we draw the document to the attention of the International Trade Committee.

Full details of the documents

OTNYR—Commission Implementing Regulation (EU) …/… of XXX on certain commercial policy measures concerning certain products originating in the United States of America pursuant to Article 4(1) of Regulation (EU) No 654/2014: (39698),—.

Background

12.11The WTO Agreement on Safeguards requires the notifying Member (in this case the EU) to give written notice before it can proceed with the suspension of trade concessions of another member (in this case the US).

12.12The Commission published its proposed list of countermeasures on 16 March 2018 and completed a stakeholder consultation on 26 March. The Trade Barriers Committee (a management committee that assists the Commission) approved the list on 17 May 2018. The Commission estimates that the value of EU imports into the US of those steel and aluminium products affected by the US safeguards was at least €6.41bn (£5.66bn)52 in 2017.

12.13The Minister’s Explanatory Memorandum of 8 May 2018 provides a helpful overview of the proposed measures. The products affected are listed in the annexes to the Regulation:

12.14The EU’s potential responses to US tariffs on aluminium and steel is also set in the Minister’s EU trade policy update to the Committee of 11 May 2018. He notes that the EU is also considering adopting safeguard measures to protect its steel and aluminium industries and lodging a dispute with the WTO (which could take three to five years to conclude). On 31 May 2018, EU Trade Commissioner, Cecilia Malmstrὄm, said that the EU “will now trigger a dispute settlement case at the WTO, since these US measures clearly go against international rules”.53

Previous Committee Reports

None.


48 Pursuant to Section 232 of the US Trade Expansion Act 1962.

50 Politico Pro, 29 May 2018.

51 Politico Pro, 29 May 2018.

52 €1 = £0.87680 Or £1 = €1.14051 at 30 May.

53 EU to open WTO case against U.S. Tariffs-Malstrom, 31 May 2018.




Published: 12 June 2018