Global Arrangement On Sustainable Steel And Aluminum Negotiations Failed, Maybe

Dec. 5, 2023
By: Pietro N. Bianchi

Recently the U.S. and EU have been negotiating the global arrangement on sustainable trade in steel and aluminum (“GASSA”). GASSA is aimed at creating a “green” steel and aluminum trade agreement where the pollution amounts used to manufacture these products impact their tariffs rates. The goal of GASSA is to combat climate change and the unfair trade practices of authoritarian regimes while protecting U.S. and EU industry and workers. No small task. Policy makers also hope that GASSA can serve as a prototype for future values-driven trade policies on other commodities. However on November 28^th, European Commissioner of Trade Valdis Dombrovskis, who also holds the succinct title Executive Vice President of the European Commission for An Economy that Works for People, said that there is "no prospect" for a global steel agreement because the U.S. would not agree to permanently lift Section 232 duties on EU steel and aluminum imports.

For background, in 2018, the Trump administration imposed a 25 percent tariff on steel products and a 10 percent tariff on aluminum products under Section 232 of the Trade Expansion Act of 1962 for national security reasons. NATO members, which properly view themselves as the U.S.’ security partners, were upset when hit with the Section 232 tariffs. In retaliation the EU hiked tariffs on important U.S. exports, such as whiskey and motorcycles. Later in October 2021, the U.S. and EU reached a temporary agreement where the U.S. would allow certain amounts of EU steel and aluminum into the U.S. without the Section 232 duties (tariff rate quotas) and the EU would suspend its countervailing duties on U.S. products and refrain from imposing additional retaliatory tariffs. Notably, the U.S.’s tariff rate quotas are set to expire at the end of 2023, which would subject all future imports of steel and aluminum to Section 232 duties.

The Section 232 dispute, among other factors, encouraged the U.S. and EU to initiate negotiations for GASSA. The tariff rate quota expiration date and details over its extension caused the recent comments over the future of GASSA. Trade Commissioner Dombrovskis’ statement initially raised concerns that GASSA negotiations have failed. But the next day, at the Meeting of the President’s Export Council Fall 2023, U.S. Trade Representative Katherine Tai indicated that negotiations over GASSA were alive and well. USTR Tai highlighted that these negotiations are not “a simple steel and aluminum exercise.” Rather, the U.S. and EU are trying to create a new paradigm for trade, a new global arrangement. The Director General of the European Steel Association also commented on the situation, stating that GASSA should not become the “collateral” of the Section 232 dispute. He emphasized that GASSA is an “ambitious international binding agreement tackling the existential challenges” of global industry.

Trade Commissioner Dombrovskis later called for the tariff rate quotas to be extended; to applied across the entire EU, rather than to individual countries; and to be administered for longer periods (six months or a year instead of quarterly). There are concerns over whether the U.S. can administer these demands before the tariffs need to be extended, raising concerns that GASSA will derail. However, with the USTR and European Steel Association backing up GASSA and calls for similar domestic reforms in the U.S. and E.U., it may be a bit early to throw in the towel.

If you have questions about carbon border adjustments or Section 232 duties, do not hesitate to contact an attorney at Barnes Richardson, & Colburn LLP.