(Washington Insider Magazine) – Steelmakers in Europe are urging Brussels to resume talks on the Global Arrangement on Sustainable Steel and Aluminium (GASSA), which is at a standstill between the EU and the US.
The US and EU pledged to work on a green steel agreement in 2021. Washington first projected a “green steel” club in December 2022 to overwhelm the frozen retaliatory tariff controversy started by the Trump administration. Improvement has been slow, and now steelmakers urge negotiators to step up efforts.
“Talks should be reactivated, building upon what has already been discussed, and possibly concluded,” stated Axel Eggert, director-general of the European Steel Association (EUROFER). “Global excess capacity is worsening each day and is unlikely to disappear regardless of the election outcomes on both sides of the Atlantic,” he disclosed to Euractiv in emailed comments.
Today, that steel club is comprehended as GASSA. With EU-US trade mediators meeting at the Trade and Technology Council ministerial today, further GASSA facts can be fleshed out.
Steel production capacity hardly outstrips demand, and the perspective is not promising. “The problem of overcapacity is expected to become even more acute in the future,” cautioned the Steel Committee of the OECD, a club of mostly wealthy countries.
China, where environmental problems and cheap labour are the norm, is home to slightly less than half of global steel production capability. Meanwhile, 15% of production capacity went unpracticed in 2023, and Western countries are exacerbated by China opening the floodgates of cheap steel.
Meanwhile, Europe and the US look to kick-start the green transformation of the steel industry, an investment-intensive procedure that is not bankable unless the offtake of “green” steel is guaranteed at above-market prices.
The steel club would deliver that by walling off “unsustainable” Chinese steel.
However, the facts surrounding the deal are fluid, according to Mike Williams, a senior fellow at the Center for American Progress (CAP), a liberal Washington think tank.
Starting talks about GASSA initially acted as a peace offering from both sides after the Trump-era tariff row when European imports fell afoul of protectionist tariffs, provoking retaliatory tariffs from the EU.
Under the Biden administration, the US instituted a tariff rate quota that allowed a certain amount of EU steel and aluminium to be imported without being hit. The EU lifted its tariffs temporarily — which EUROFER’s Eggert expressed as a “positive step.”
Still, the EU would choose the tariffs to be abolished entirely rather than have to adhere to a quota.
The FT reported that the EU intends to engage in litigation brinkmanship and take the US to court at the World Trade Organisation to up the pressure — while negotiating the terms of a would-be steel club. Doing so, however, would not be facilitative to GASSA talks.
The current understanding has been extended to December 2023, with the next deadline falling after the November 2024 election in the US, where a second Trump administration threatens.
“Steel yourself,” warned the trade experts at the Bertelsmann Foundation, adding that the return of Trump would bring new tariffs and overpower the steel club. However, the biggest challenge may be the substantially different approach to industrial transformation.
The US looks to offer a tariff based on the carbon intensity of steel imported from other countries but escapes domestic production untouched because it is considered politically toxic.
“It will inevitably come up, but at this point, it is challenging to discuss whether the domestic carbon price can be set up, and that’s what I see from Brussels,” stated Irina Kustova, a research fellow at the Centre for European Policy Studies (CEPS).
CAP’s Williams stated the current political climate makes such a policy “nonstarter”.
According to Williams, at least two US Senate bills in the works would launch a US CBAM, levying high tariffs on imports of materials like steel and aluminium from carbon-intensive countries like China, benchmarked against US emissions. One democrat US senator’s bill also suggests a domestic carbon tax.
