Will G20's Stand on Steel Overcapacity Slow Trump's Section 232 Announcement?

“Recognizing the sustained negative impacts on domestic production, trade and workers due to excess capacity in industrial sectors, we commit to further strengthening our cooperation to find collective solutions to tackle this global challenge,” the joint statement will read. “We urgently call for the removal of market-distorting subsidies and other types of support by governments and related entities. Each of us commits to take the necessary actions to deliver the collective solutions that foster a truly level playing field.”

German Chancellor Angela Merkel called the trade discussions “very difficult” due to the Trump team’s stand on trade. She urged multilateral solutions to overcapacity rather than bilateral actions such as Section 232 restrictions under consideration in the U.S.

“It’s a chance to solve the steel overcapacity issue in a multilateral way, in the community of the G20,” Merkel said. “Otherwise the likelihood of bilateral measures will increase, and that is why today during the meeting I have expressed that we should try to solve this issue through the global forum, because we created this forum for one another.”

In comments to the press following the conclusion of the summit, Merkel said of the negotiations for the G20 joint statement, “I don’t want to beat around the bushes – it’s still difficult to discuss trade questions; every word is weighed there.”

“Steel is in fact a dicey issue, and I put a lot of effort into – and asked everyone to compromise – that we could arrive at a timetable, an ambitious timetable with August and November, to make sure the issue isn’t pushed back too far,” she added, “because otherwise one would have to fear bilateral measures, which I would not approve of.” Merkel noted that, although important, steel was only one of many trade issues.

Members resisted U.S. protectionist policies and added to the joint statement that G20 members “will keep markets open noting the importance of reciprocal and mutually advantageous trade and investment frameworks and the principal of non-discrimination, and continue to fight protectionism including all unfair trade practices and recognize the role of legitimate trade defense instruments in this regard.”

The addition of the word “reciprocal” was added at the behest of the Trump administration, along with the word “truly,” as in “truly level playing field.” According to World Trade Online, during the discussions the words “fair” and “reciprocal” were issues of contention. “Fair trade” was frequently substituted for “free trade” by Trump and some countries, reportedly, adopted the phrase to ease tensions.

“The question is whether the Americans are still convinced that world trade always needs to be assessed according to one question, namely whether the U.S. is the winner, or whether we’ll manage to convince the Americans that when everyone plays by the same fair rules, everyone will be better off,” said German Foreign Minister Sigmar Gabriel.

“We stand united in opposition to protectionism, that I think will be a positive outcome from this meeting,” Canadian Finance Minister Bill Morneau told reporters in Hamburg. “What I believe to be the case is we all recognize the importance of trade to our economies, the importance of trade to growth, and the difficulties protectionism presents. That’s a subject that has reached consensus.”

“Our world has never been so divided,” said French President Emmanuel Macron following the conclusion of the summit. “Centrifugal forces have never been so powerful. Our common goods have never been so threatened.”

Several leaders reiterated their intention to retaliate if the United States imposes penalizing measures on the EU through Section 232 action.

“Barriers on steel imports would be very bad for the EU, as European businesses and workers could be affected very heavily and jobs would be threatened,” said EU trade Commissioner Cecilia Malmstrom. “If global trade rules are not upheld, the EU will retaliate,” she added. “But we don’t think this is the right way to go, as you cannot fight protectionism with protectionism.”

“We will respond with countermeasures if need be, hoping that this is not actually necessary,” European Commission President Jean-Claude Juncker told reporters ahead of the Summit meetings.

Juncker warned that Europe would take action in days not months if hit with restrictions by the Section 232 measure. “We are prepared to take up arms if need be,” Juncker said.

President Trump and his team returned to the U.S. without a formal press briefing in Hamburg and lauded the meetings as a “wonderful success,” giving praise to many of his international colleagues.

On Sunday, Trump tweeted, “The G20 Summit was a great success for the U.S. – Explained that the U.S. must fix the many bad trade deals it has made. Will get done!”

Where Does this Leave Section 232?

The results on the Section 232 national security investigation were delayed by the Commerce Department until after the G20 meetings. This week, the Defense Department ordered a 60-day review of steel use in U.S. defense applications that will further slow any actions on Section 232.

Politico writes that industry sources speculate, “DoD’s request for additional information could either give the report and any subsequent action by the president better legal cover either in domestic courts or at the World Trade Organization, or it could represent general skepticism of the process by Defense officials.”

Trade attorney Lewis Leibowitz commented to SMU on the Defense Department request: “The latter report is interesting, to say the least. If Defense wants to conclude that steel procurement is not a national security issue, then Commerce will have a tough time defending its opposite position in court. There are many staunch allies that can fill in any blanks in domestic steel supply if necessary. The 60-day time frame is also interesting. If Commerce wants to issue a decision in July, it can’t wait for Defense to finish its review.”

Free & Fair Trade

Free and Fair Trade will be one of the subjects discussed at this year’s SMU Steel Summit Conference in Atlanta at the end of August. We have assembled trade attorney Lewis Leibowitz, Steel Manufacturers Association President Philip Bell, President Emeritus of the Precision Metalforming Association William Gaskin, and Cato Institute trade expert and former ITC Chairman Daniel Pearson. You can find more details about our schedule, speakers, costs associated with attending and registration on our website: www.SteelMarketUpdate.com/events/steel-summit