The
new deal, which excludes aluminum, will take effect on April 1
and requires Japan to take "concrete steps" to fight global
excess steel manufacturing capacity, largely centered in China,
U.S. officials said.
A joint U.S.-Japan statement said Japan would start to implement
within six months "appropriate domestic measures, such as
antidumping, countervailing duty, and safeguard measures or
other measures of at least equivalent effect," to establish more
market-oriented conditions for steel.
The agreement, like the EU steel and aluminum deal reached in
October, calls for steel imported from Japan to be completely
produced in the country for duty-free access, a standard known
as "melted and poured," to reduce the risk of Chinese steel
skirting U.S. tariffs.
"This is a step towards a solution... but we will continue to
strongly urge the United States to fully eliminate the tariff in
a manner consistent with WTO rules," Japanese industry minister,
Koichi Hagiuda, said on Tuesday.
An official at the ministry said the exclusion of aluminum
reflected the U.S. position and was not a request by Japan.
STRAINS WITH ALLIES
Much of the Biden administration's trade efforts have centered
around patching up strained relations with U.S. allies that are
market-driven democracies.
U.S. Commerce Secretary Gina Raimondo said the deal "will
strengthen America's steel industry and ensure its workforce
stays competitive, while also providing more access to cheaper
steel and addressing a major irritant between the United States
and Japan, one of our most important allies."
Unlike the EU and Britain, which is seeking a similar deal,
Japan did not impose retaliatory tariffs on U.S. goods such as
whiskey, motorcycles and denim.
The deal comes as U.S. steel prices are starting to recede from
record highs spiked by strong demand and pandemic-driven supply
constraints, which contributed to high inflation throughout the
economy.
Midwest hot-rolled steel futures, which peaked at $1,945 a ton
last September, closed at $1,180 on Tuesday, still nearly double
their $578 price on Feb. 7, 2020, before the pandemic hit.
INDUSTRY RELIEF
U.S. steel industry executives had voiced concern that the Biden
administration would negotiate too much access for foreign steel
makers and unleash a flood of imports as they invest billions of
dollars in new capacity.
But industry executives voiced relief that the deal announced on
Monday limits Japanese imports to about their two-year average
from 2018 and 2019, a level that reflects the impact of the 25%
"Section 232" national security tariffs were imposed by former
president Donald Trump.
Unlike the EU deal, which added past tariff exclusions to the
bloc's quotas, Japanese steel imported under past tariffs will
count against Japan's quota volumes.
Steel Manufacturers Association President Philip Bell said about
58% of the 2021 steel imports from Japan, or about 550,000
metric tons, came in via exclusions, so the deal would limit
incremental volume.
"Overall this is a strong deal for American steelmakers. It
shows that we should not take a one-size-fits-all approach when
it comes to our jobs, environment and economic growth," Bell
added.
CARBON TALKS OPT-OUT
Japan also will initially not participate in U.S.-EU talks on a
global agreement to discourage trade in steel made with
high-carbon emissions - another initiative aimed at battling
carbon-intensive Chinese steel output. But U.S. officials said
Japan would confer with the United States on methodologies for
measuring carbon intensity in steel and aluminum production.
Japan's steel industry also is highly dependent on coal-fired
blast-furnace production, while more than 70% of U.S. steel is
made with electric-arc furnaces that emit less carbon.
(Additional reporting by David Brunnstrom in Washington,
Kanishka Singh in Bengaluru and Yuka Obayashi in Tokyo; Editing
by Barbara Lewis, Stephen Coates and Richard Pullin)
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