BIR applauds OECD proposals on steel

The Bureau of International Recycling (BIR), a Brussels-based recycling association, has welcomed the Organisation for Economic Cooperation and Development’s (OECD) proposals of multilateral action to counter the impact of export restrictions on steelmaking. The advice was given at an OECD workshop recently held in Cape Town, South Africa, which highlighted the negative impact that export restrictions have on the industries countries are looking to protect and the efficiency gains possible from the simultaneous removal both upstream and downstream of steelmakers.

The BIR noted that export restrictions introduced to protect a country’s primary and secondary raw materials supply could jeopardize the viability of both the mining and the scrap supply sector. Access to cheap domestic scrap created by export restrictions could lead to uncompetitive plants remaining in operation and serve as a deterrent to investment for the future. Furthermore, the BIR notes, such restrictions placed governments in the position of arbitrating between industry sectors across the same value chain.

In comments, the BIR noted that making the use of export restrictions more transparent was the first step proposed toward their removal because only then could alternative policies to achieve the same objective be determined. The best way forward was the simultaneous multilateral removal of export restrictions. The time was ripe for such action, it was said, in order to seize the opportunity created by the oversupply of steelmaking raw materials in the next few years.

In comparison to other industries, the BIR says, the steel industry is most affected by trade-restrictive measures, and the risk of trade friction in the global steel industry has increased of late. The industry is particularly susceptible to protectionist measures owing to its history of subsidies and excess capacity.

During the Cape Town meeting, a BIR representative explained that the most common reasons given for introducing export restrictions were to strengthen the competitive position of national processing industries and to enhance government revenues. As regards the latter, better alternative policies existed that did not deter investment.

Regarding trade defense instruments, steel accounts for more than 40 percent of Countervailing Duty Initiations for nearly a quarter of anti-dumping cases; and for more than 15 percent of safeguard actions. The OECD saw the need was now to avoid further escalation of trade actions.

“While the trend towards more export restrictions is currently the case, this OECD workshop has now made the case for multilateral action to reduce such restrictions in order to benefit the steel industry worldwide,” said Ross Bartley, BIR’s environmental and technical director, who attended the workshop.

“The slower alternative is for countries to remove export restrictions though bilateral trade agreements. The difficulty is that almost all steelmakers and their governments would need to be convinced of the benefits to take multilateral action and to take that multilateral action in order to get those increased benefits to more steelmakers more quickly.”

The meeting was organized by governments participating in the OECD Steel Committee and South Africa’s Department of Trade and Industry. The workshop brought together close to 100 representatives from governments and the steel industry value chain with the aim of assessing emerging market trends and policy developments affecting trade in steelmaking raw materials, achieving a better understanding of the impact trade-restrictive raw material policies have on the global steel industry and exploring policy approaches that would improve the longer-term efficiency and functioning of steel markets.

It was also noted at the event that local export restrictions were often being justified on the basis of historical experiences of the industrialization of Europe and North America, but that such experiences did not match current business practices. The overriding conclusion was that worldwide export restrictions had been more effective as an investment deterrent than as an industrialization incentive.

BIR pointed out that OECD modelling has demonstrated that the simultaneous abolition of export restrictions on all major steel raw materials would increase trade, reduce steelmaking production costs and expand the global supply of steel inputs. And there would be a dual benefit if the steelmakers in the countries facing relief from restrictions were also exporters.