The mid-point review of the Tariff Rate Quota (TRQ) program currently
in place as a result of the Section 201 remedy against imports of carbon
wire rod in February 2000, was held on July 11. AWPA member company representatives
testified before the International Trade Commission (ITC) on how this program
has affected their business operations. The mid-point review is referred
to as the Section 204 investigation. The AWPA participants were: Pete Cronin,
Industrial Wire Products; H Woltz, Insteel Industries; Bob Moffitt, Davis
Wire Corporation; Joe Downes, Leggett & Platt and Kimberly Korbel,
Fred Waite and Kimberly Young from the AWPA staff.
Among the points emphasized by AWPA were: the concern of US wire producers
about the dramatic reduction in domestic capacity and production since
the beginning of this year (i.e., the closure of one million tons or 25%
of overall domestic rod production); vastly different economic and market
conditions than when the program was initially put into place; and the
assumption that the economy will start to pick up, and therefore demand
for carbon wire rod will increase.
Concluding their testimony, the AWPA witnesses urged the ITC to further
liberalize the TRQ in order to compensate for the closure of one-quarter
of the domestic industry's capacity to produce wire rod. The Commissioners,
it was suggested, should recommend to the President that the quota component
of the TRQ be increased to account for the one million ton production gap
in the domestic market.
AWPA also recommended, and the rod producers agreed, that the existing
TRQ be changed to establish a fixed subquota for the fourth quarter of
each quota year, thereby breaking the quota amounts into four pre-determined
levels. As currently written, the system allocates one third of the total
annual quota to each of the first three quarters of the quota year, with
any unused quota allocated to the fourth quarter.
In response to suggestions by the Petitioners that the ITC recommend
regional or country-specific quotas, AWPA responded in its post-hearing
brief that the wire producers are strongly opposed to this idea. Country-specific
quotas that lock in each import source to a set number of tons eliminates
the ability of US wire drawers to adjust to changes in supply and demand.
They would make the Section 201 remedy both inflexible and more restrictive.
Further, the 201 trade law only permits modifications that would make the
TRQ less restrictive.
AWPA also stated its opposition to the inclusion of Mexico and Canada
in the existing program.
During the question and answer session, many of the Commissioners focused
on the supply and demand issue. AWPA's point was that although demand for
wire rod is depressed right now, there is anticipation that there will
be some improvement in economic and market conditions by the end of this
year and into next year. As domestic demand begins improving, the full
impact of the loss of one million tons of domestic rod from the marketplace
will be felt by the wire producing industry.
The Petitioners repeated their claim that the TRQ has been ineffective
and therefore their efforts to adjust have been undermined. They asserted
that the quota volume levels were set too high and the country exemptions
too broad. By providing no restraints to imports, they argued, the existing
TRQ is an insufficient remedy. As a result, they believe the industry is
in worse condition than when the program started despite efforts to implement
their adjustment plans.
They recommended that: (a) the quota volume should not be increased;
(b) the Commission should recommend country-specific quotas; and (c) the
TRQ should be modified to include Canada and Mexico, citing a surge of
imports from these two exempted countries since the program began (707,578
tons, up 44.9% from 488,398 tons in 1998).
Petitioners opposed the AWPA request for more quota by claiming that
"(t)here is no evidence of current or future shortages of wire rod in the
market. Assertions to the contrary amount to speculation that are not borne
out by the data collected by the Commission." They then quoted Bill Lundberg's
statement that North Star has 50,000 tons of inventories available for
immediate delivery and referred to Tim Dillon's testimony that Georgetown
has capacity available.
The Petitioners also claimed that, with the decline in demand, there
is "more than enough available wire rod to meet domestic demand." They
concluded: "What the wire drawers naturally fear is not a shortage of supply,
but a rise in prices. Relaxing the TRQ is an attempt to prevent domestic
price increases from taking hold."
Responding to the Commissioners' questions, Petitioners had only very
general comments about the nature of a country-specific quota regime: (a)
quota allocation should be based on a representative period that includes
1994-1995 and (b) specific quotas should apply to "each of the major producing
countries" (not further identified) with a basket for the remaining countries.
The Japanese respondents opposed country-specific quotas as an illegal
restriction of the TRQ, citing US law and the WTO Safeguards Agreement.
They also criticized the domestic industry for making too few efforts to
adjust to import competition.
The German respondents repeated their arguments that (a) the TRQ should
be terminated and (b), if it is not terminated, quotas should be allocated
to geographic regions, such as the European Union. In addition, the German
respondents endorsed the AWPA's proposal that some of the quota should
be reserved for the fourth quota. Finally, raising a new point, the German
respondents recommended the creation of separate HTS numbers for "special
quality wire rod" so that it can be tracked separately from industrial
quality rod.
Caribbean Ispat Limited (CIL) submitted its views on how to calculate
country-specific quotas for "traditional" suppliers if the Commission adopts
the recommendation of the German respondents. Further, CIL endorsed the
AWPA's proposal that some of the quota should be reserved for the fourth
quota.
Belgo-Mineira (Brazil) criticized the domestic industry for putting
the TRQ "on trial" and argued that the TRQ should be continued only if
the relief will enable the domestic industry to adjust to import competition.
Belgo-Mineira also claimed that the excluded rod products are not subject
to this review and, therefore, the Commission should not recommend any
modifications that would affect the excluded products.
The Mexican producers opposed the extension of the TRQ to cover the
NAFTA countries, arguing that imports from Mexico have not undermined the
effectiveness of the remedy. The Canadians did not file remarks.
The ITC makes its recommendation to the president on any changes to
the TRQ program by August 30, 2001. Bush then has 30 days to make his final
decision.
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Alexandria, VA 22314-1757
Tel (703) 299-4434 | Fax (703) 299-9233 | E-mail info@awpa.org | Web: www.awpa.org
