Some progress was made after the most recent round of multilateral talks on negotiating a steel subsidies agreement. The thirty-six delegations, including China, participating in the meetings of the OECD Steel Disciplines Study Group, addressed issues concerning exceptions to prohibited subsidies (Article 3) and special and differential treatment of developing countries (Article 4). However, several major hurdles must be cleared before steel-producing nations approve the framework of a global steel subsidy pact. The secretariat overseeing the talks - Herwig Schlogl, Deputy Secretary General of the Organization for Economic Cooperation and Development (OECD) - insisted that a resolution must be reached by the end of the year. Schlogl agreed that the question of whether a pact would supersede the right to file countervailing (CVD) duty trade cases was a major sticking point that negotiators have yet to address, but must eventually resolve. The US industry has said it would walk away from any agreement that flat-out prohibited the use of CVD laws. India was distressed with the compromise proposal in relation to special and differential treatment for developing countries and economies in transition. India said the needs of such developing countries as India and Brazil differ significantly from economies in transition, such as Eastern European steelmakers, and should be addressed separately in an accord. The OECD proposal suggested a five-year phase out of subsidies for qualifying countries with steel companies whose total sales of covered products do not exceed $100 million. India charged the phase-out period was inadequate to address the concerns of developing countries relating to structural inadequacies in infrastructure, and "cost of finance" and suggested a period based on the country achieving a particular percentage share in global trade of steel products or global per capital steel consumption. India also noted that the $100 million threshold was too low and needed to be substantially enhanced. Conversely, other participants, such as Canada, Japan and China Taipei advocated the use of a simple set of rules tied to objective and measurable benchmarks to determine whether a country would qualify as a developed country. These participants stressed the use of such criteria as the level of exports, production, consumption and/or steel labor productivity for purposes of determining the competitiveness of the steel industry in the particular country. The OECD Secretariat made a proposal to the delegates suggesting that the agreement allow developing countries to subsidize its steel industry up to a certain cap (i.e., 2% of industry turnover) and allow companies the flexibility to determine how to use the subsidy. The participants expressed interest in this proposal and informed the Chairman of their intention to take the proposal back to their capitols for further examination and discussion. On the Article 3 front, exceptions for subsidies related to research and development, environmental compliance and partial plant closures will be included in the draft subsidy agreement. The European Union pressed hard to include subsidy exceptions for research and development and environmental compliance in the global agreement. Language related to exceptions for subsidies linked to partial plant closures is a win for US trade officials who argued a pact allowing only subsidies for full, permanent plant closures was too limiting. The participants agreed that subsidies to pay for environmental expenses and worker retraining programs related to the complete closure of steel companies would facilitate such closures and thus would be consistent with the object and purpose of the agreement. A number of countries also supported an exemption for subsidies related to partial closures, on the condition that such closures decrease capacity. On a positive note, China, the world's largest steel producer, has rejoined the negotiations - a sign that the talks are making headway. The Bush Administration and steel supporters in Congress have said China - which will produce 210 million metric tons of steel products this year - needs to be a part of any steel subsidies agreement. China dropped out of the OECD talks last year.
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