U.S. Allocates New Steel Import Quotas; Japan’s Share Reduced

The United States has completed negotiations with most of the world’s major steel-producing countries on how to allocate U.S. import quotas for the next 2 1/2 years--with increases slated for Poland, South Korea and Mexico, apparently at the expense of Japan.

The new allocations are designed to fulfill a promise that President Bush made just before last year’s election to extend the steel import quota program that was begun in 1984. The move came despite calls by critics to cut back on the quotas.

But U.S. officials said Friday the Administration is having trouble lining up U.S. trading partners to participate in a companion program designed to lay the groundwork for a new international accord to phase out government subsidies to steel industries around the world.

In a prototype pact recently signed with the European Community, the Administration was forced to exempt most existing steel operations in Europe from the anti-subsidy move and to accede to a broad list of exceptions, from environment-related subsidies to those intended to help avert plant-closings.

Under the Administration’s double-barreled approach, the United States provides foreign steel producers who agree to reduce or phase out their own steel subsidies a small increase over their previous import quota. Eighteen countries out of 29 have signed on so far.

Many foreign steel producers receive heavy government subsidies, which give them an unfair advantage over steelmakers from countries that provide no such incentives. As a result, the subsidized firms often underprice American steelmakers in global markets.

U.S. steelmakers are chafing a bit over details of the new quotas and subsidy phase-out accords, but they have told supporters that they are reluctant to criticize the package openly for fear of angering the Administration and jeopardizing the quota extension.

They also wonder how effectively the new programs can be enforced. Although U.S. steelmakers will still be able to file trade complaints at home if foreigners violate the pacts, the accord calls for setting up international arbitration to settle any disputes.

That provision “worries” steel companies in the United States, according to a source close to the industry. He described the industry’s response as “grumbling, but not apoplectic” about the agreements that have been struck.

The essential completion of talks on the quota extension climaxes 10 weeks of negotiations with other countries by officials of the U.S. trade representative’s office. The quotas cover 29 steel-producing nations. Canada, which also sells steel here, is not part of the program.

Officials said two countries--Brazil and Argentina--have still not signed pacts agreeing to comply with specific quotas for their shipments to the United States. In both cases, however, the volume of steel they ship is relatively small and one or both may sign by the end of next week, the officials said.

The United States uses about 100 million tons of steel each year, about 80% of which is produced domestically. Since the quota program began, it has squeezed imports to about 20% of the total, down from 26% in 1984. It also has exacerbated supply shortages.

Although Bush disappointed free-trade advocates when he pledged last November to extend the import-quota program, he shocked the industry in July by announcing that he would phase them out in 2 1/2 years rather than continuing them for a full five years, as U.S. steelmakers had sought.

He also ordered U.S. Trade Representative Carla A. Hills to begin negotiations aimed at forging “international consensus” to end government steel subsidies globally by 1992. The U.S. steel industry has received import protection since 1968.

U.S. strategy in negotiating the new quotas was to keep most of the previous limits for individual countries intact, while providing a small “bonus” to countries that agreed to join in working to reduce existing subsidies or phase them out.

To accomplish this, the Administration reduced Japan’s share of the U.S. steel market to 5% of domestic consumption for the next 15 months and 5.3% from then through March, 1992. Japan’s quota had been 5.8% of the U.S. market, but it used only three-fourths of that amount.

The Japanese agreed to the pact Thursday evening. U.S. officials said that unless Tokyo had acceded, the entire program could have fallen apart.

The new program will allow the 12-nation European Community a small increase--to 7% of the U.S. market, from 6.68% in the 1984-89 period.

U.S. officials said the new quota allocations will effectively double the share alloted to Mexico, pushing it to 0.8% of the U.S. market, from 0.4% before. And Poland’s quotas will be increased by about 40%.

South Korea’s quota also will rise, to 2.45% of the U.S. market, from 1.95% previously, but most of that is designed to accommodate a new joint venture between the Pohang Iron & Steel Co., South Korea’s largest steel producer, and USX Corp., formerly U.S. Steel.

Others, including Romania, Hungary, Trinidad and Tobago, China and Czechoslovakia, all receive only marginal changes.