Brazil to Curtail U.S. Steel Exports

Brazil agreed to curtail exports to the U.S. of a key steel product used in cars and appliances to avoid tariffs that would have priced its steelmakers out of the U.S. market.

The agreement--which U.S. steelmakers denounced as inadequate--calls for Brazil’s two largest steel producers to suspend shipments of hot-rolled steel until October, then cut annual exports by 28% for five years. It will also establish minimum prices for the imports.

The U.S. government will drop an investigation of Brazilian government subsidies to steelmakers as a result of the accord, which it said was designed to protect the U.S. industry from a surge of low-priced imports. The agreement also is aimed at allowing economically struggling Brazil to continue selling steel to the U.S.

The accord “will help ensure the U.S. steel industry will not be injured any more this year,” Commerce Secretary Bill Daley said in a telephone conference. “It will provide better protection [than duties] by providing certainty in the market.”

U.S. steelmakers disagree, saying that Brazil violated trade rules. The steelmakers had asked the Commerce Department earlier this year to limit Brazil’s hot-rolled steel shipments.

“We oppose suspension agreements in principle and in practice,” said Mark Tomasch, a spokesman for LTV Corp., the No. 4 steel producer in the U.S. and one of the companies that brought the complaint against Brazil.

U.S. steelmakers have filed a spate of complaints accusing foreign producers of selling steel in the U.S. at below production cost.

They have called on the U.S. government to impose duties of as much as 223% on cold-rolled steel, another core product, imported from Brazil, Japan, China and nine other countries.

The Clinton administration is reluctant to impose those kinds of penalties, fearing they will hamper the economic recoveries of the targeted countries. Those countries and many other emerging markets in Asia, Latin America and Eastern Europe have tumbled into recession in the last year, leaving exports as one of their few engines of growth.

The latest ruling came Wednesday, when the U.S. International Trade Commission said stainless steel sheet and strip imports from eight countries--including South Korea and Japan--injured U.S. producers, a decision that opens the door for tariffs.

Without Wednesday’s agreement, Brazil would have faced dumping duties of up to 43% and countervailing duties of up to 10% for unfairly subsidized goods, the Commerce Department found.

While the industry’s dumping complaints have helped decrease steel shipments to the U.S. in recent months, Brazil’s exports of all types of steel here surged 81% in May, to 376,954 metric tons, from the same month last year.