Why is the Commission making this proposal?
Global overcapacity, often driven by non-market policies and practices, keeps growing relentlessly, and it is already at unsustainable levels [currently over 620 million tons, and estimated to reach 721 million tons – more than 5 times the EUs annual steel consumption].
In parallel, a growing number of third countries are closing their markets to imports, often in the form of tariffs (including prohibitive levels). This creates a very big risk of trade diversion into the EU market, in a situation where import penetration [in terms of imports market share] remains at historically high levels.
The current level of protection offered by the steel safeguard measure will expire on 30 June 2026. Therefore, devising this specific proposal for the steel sector was the best solution to ensure a highly effective level of protection for the steel sector.
It is very important to preserve a strong steel industry, securing investments for its successful decarbonisation, and to avoid undermining our strategic autonomy in this key sector.
The Commission remains fully committed to finding a collective solution to the problem of global overcapacity. However, until that materializes, the EU needs to take firm action and with this proposal, it is doing so.
The form of the measure is a tariff quota: why was this chosen over an upfront tariff?
The form of the measure has been carefully calibrated to make sure that it is highly effective, but it preserves a certain (necessary) level of openness. This is fully in line with the Steel and Metals Action Plan objectives.
EU steel producers themselves called for a system of tariff quotas. A system of upfront high duties would have run against the overall Union interests, unduly harming our wide and very important downstream sector. This system strikes the right balance.
The 50% out-of-quota duty also ensures that trade outside the tariff quota volumes will be limited, thus not undermining the effectiveness of the measure. A lower level of duty (25%) would have risked being ineffective, considering the tariff levels prevailing in other third country markets, with the ensuing risk of trade diversion.
You are significantly cutting the level of free-of-duty tariff quotas compared to the safeguard measure: isnt there a risk of shortage of supply or of substantial price increase?
Indeed, it is a significant reduction of tariff quota levels. However, this was necessary given the market circumstances.
The EU industry is operating at very low-capacity utilization levels (around 67%). The measure needs to give sufficient room for our industry to reach healthier capacity utilization levels (80%).
Against this background, a milder solution in the form of higher volume of tariff quotas would not have been sufficient to tackle the core of the problem.
The market will need to adjust to the new reality in the coming months, but we consider that the level of tariff quota combined with the existing capacity available in the EU would be sufficient to supply the EU market.
In addition, the measure allows for the adjustment of volumes, including for specific product categories, should supply concerns arise including through an urgency procedure.
Will special provisions be made for EEA countries?
EEA countries will not be subject to tariff quotas or duties. Such a differentiated approach is justified due to their very close and unique level of integration in the EUs internal market.
EEA countries were already excluded from the steel safeguard on the same grounds and over 7 years their level of exports remained stable (and rather limited in volumes). Therefore, the combination of their unique status vis-a-vis the EU, which no other FTA has, and their limited volumes of exports, not posing a threat to the measure, warrant such treatment.
However, to avoid that third country producers attempt to use this exclusion as a loophole, importers of covered steel products from the EEA will also have to provide evidence of the country of the melt and pour, just like those from any other country subject to the tariff system.
How is the proposed measure compatible with WTO rules? Will third countries retaliate against the EUs measure?
A WTO member can take legitimate action (such as increasing its tariff commitments under WTO) in compliance with the rules (procedure regulated by GATT Article XXVIII), but in doing so, other countries may be entitled to compensation or retaliation. Such rights are of course bound to certain rules and have limitations.
Stakeholders, including third country governments, were invited to express their views on the EUs proposal, but few countries availed themselves of this opportunity. Of those that did, several acknowledged the rationale for the EU to act against overcapacity.
Many of the countries that will be impacted by our measure have imposed their own protective measures themselves, in the form of upfront tariffs in most cases.
The only way to avoid this proliferation of unilateral measures is to address the root of overcapacity collectively. The EU remains fully committed to advancing on that objective together with like-minded partners, both bilaterally and collectively in the context of the Global Forum on Steel Excess Capacity (GFSEC).
How about FTA partners in general? Is this measure compliant with the EUs FTA commitments?
The Commission will discuss the implications of its proposal with its trading partners and will continue to emphasize the need to find a collective solution to the global overcapacity problem.
However, we need to be realistic – an exclusion of FTA partners imports is not possible. They represent 2/3 of total imports, some of which contribute to overcapacity, and such an exclusion would make the measure totally ineffective.
How will the measures affect Ukraine?
The Commissions support for Ukraine is unwavering. Under the measure, Ukraine will have access to a system of free-of-duty tariff quotas in the quota allocation. In this respect, we will take into account the situation of a candidate country facing an exceptional and immediate security situation.
How is the measure going to comply with the Windsor Agreement regarding Northern Ireland?
As outlined in the proposal, the Commission will continue to apply the same regime agreed with the UK as far as trade flows from the UK into Northern Ireland are concerned, in full respect of the Windsor Agreement.
The specific volumes will be laid down once the proposal is adopted by the co-legislators.
The EU and the UK are closely cooperating in the framework of the GFSEC and will engage bilaterally on the issue of Northern Ireland and the measure at large.
How does this measure interact with Augusts EU-US Joint Statement?
This is a unilateral measure proposed by the Commission in view of the needs of its steel industry as laid down in the Steel and Metals Action Plan, which predates the EU-US Joint Statement.
However, the Commission shares many of the concerns of the US on this sector.
The Commission remains fully committed to engaging with the US administration with a view to improving our industrys market access to the US. As part of that commitment, both sides are aware of the importance of addressing the negative trade-related effects of global overcapacity. The Union is ready to work with like-minded countries with a view to ring-fencing their economies from global overcapacity while ensuring secure supply chains and increasing market access among them. We will continue exploring ways of working together with the US to achieve a successful outcome.
How will the proposed measure interact with existing/future trade defence (TDI) measures on various steel products?
TDI measures such as anti-dumping and countervailing duties apply from the first ton imported. There are several product categories under the scope of the proposal subject to TDI measures. This means that such imports will pay the duties in place under TDI measures and, if they exhaust the tariff quota under the measure, an additional 50% duty would apply.
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