WTO finds US steel, aluminum duties violate trade rules

A World Trade Organization panel determined the US' steel and aluminum tariffs are inconsistent with international trade obligations and recommended that modifications to the duty program be made, the trade organization said Dec. 9.

"The panel recommends that the United States bring its WTO-inconsistent measures into conformity with its obligations under the GATT [General Agreement on Tariffs and Trade] 1994," the WTO said in separate panel reports on four disputes brought against the US by Norway, China, Switzerland and Turkey.

In the reports, the WTO panel found that the US' metal tariffs are not protected as a national security measure as interpreted by GATT 1994, which potentially protects certain trade actions "taken in time of war or other emergency in international relations." GATT 1994 aims to promote international trade by reducing tariffs and other trade barriers and eliminating discrimination.

Furthermore, the WTO panel determined that countries with an exemption from the US tariffs have an unfair advantage compared with nations that are still subject to the duties.

Then-President Donald Trump originally established US imports duties of 25% on steel and 10% on aluminum against most countries in March 2018, arguing that the trade protection was needed for national security purposes. The tariffs were put into effect under Section 232 of the US Trade Expansion Act of 1962.

The steel and aluminum tariffs triggered multiple countries to lobby for a WTO review.

Since 2018, the tariffs have either been fully removed, partially removed or replaced with a quota system for imports from Canada, Mexico, Australia, Argentina, Brazil, South Korea, the EU, the UK and Japan. The tariff exemptions and modifications were reached as part of separate mutual agreements between the US and its respective trade partners, rather than as a result of a WTO ruling.

Disputes against the US tariffs filed by India and Russia are still being reviewed by the WTO.

US trade rep, steel groups slam WTO ruling

The Office of the US Trade Representative and domestic industry groups criticized the WTO's ruling, questioned its authority on the matter and called for the international trade organization to reform its dispute settlement system.

"The United States strongly rejects the flawed interpretation and conclusions in the World Trade Organization panel reports released today regarding challenges to the United States' Section 232 measures on steel and aluminum brought by China and others," Assistant US Trade Representative Adam Hodge said in a statement.

"The United States has held the clear and unequivocal position, for over 70 years, that issues of national security cannot be reviewed in WTO dispute settlement, and the WTO has no authority to second-guess the ability of a WTO member to respond to a wide-range of threats to its security," Hodge said.

The US does "not intend to remove the Section 232 duties as a result of these disputes," he said.

American Iron and Steel Institute CEO Kevin Dempsey said the WTO dispute panel went "beyond its mandate" in making the determinations.

"Each member of the WTO has the right to determine what action it considers necessary to protect its own national security, and today's panel ruling disregards this central feature of the WTO system," Dempsey said in a statement. "This decision highlights once again why significant and systemic reform of the WTO dispute settlement system is essential to ensure that all WTO members' rights are fully protected."

Dempsey said the steel tariff has been critical in stemming import surges and promoting domestic investment to increase production.

The Steel Manufacturers Association, another US steel industry group, shared the same sentiments and supported the USTR's refusal to accept the WTO ruling.

"These convoluted reports underscore the need for WTO reform and highlight the ineffectiveness of the body in dealing with global excess steel capacity and market distorting behavior," SMA President Philip Bell said. "At the end of the day, these reports do not change anything regarding the Section 232 duties."

Domestic producer US Steel commended the USTR's assertion that the government would not remove the metal tariffs, adding that the company is "confident that this World Trade Organization opinion will not affect the Section 232 policy, and it will remain in place."

Imports dip since 2018

US steel and aluminum imports have declined since the tariffs were put in place in 2018, coming down from record highs during the last decade, according to US Commerce Department data.

Domestic steel imports totaled about 28.58 million mt in 2021, down from over 34 million mt in 2017 and a record of over 40 million mt in 2014.

Similarly, US aluminum imports dropped to 5.56 million mt in 2021 from a record 6.87 million mt in 2017.