According to a preliminary finding issued by the U.S. Department of Commerce on November 10, Russian steel companies once again face prospects of prohibitive sanctions on their exports to the U.S. market. This ruling, which sanctions the argument that Russian steel is “dumped” on the American market at prices below production costs, came as a surprise to Russian trade officials, who apparently believed that a deal negotiated with Washington last summer would forestall antidumping sanctions. The ruling also underscores the importance of Russia’s continued nonmembership in the World Trade Organization (WTO).
Should it be confirmed by the Commerce Department and the U.S. International Trade Commission, the preliminary ruling would slap a 178 percent tariff on Russian cold-rolled steel imports used in the production of automobiles, household appliances and numerous other goods (Reuters, November 11). The ruling also targeted steel exporters in other countries, including China, Indonesia, Slovakia, Taiwan, Turkey and Venezuela, for antidumping duties. However, the 178 percent levy against Russia would be the highest perhaps because (according to Commerce Department statistics) Russia was the largest supplier of steel imports on the U.S. market last year, exporting 649,000 metric tons worth US$220 million (St. Petersburg Times, November 12). As such, the ruling would effectively close the U.S. market to Russian steel.
According to the preliminary ruling, Russian sales in the United States were made at prices below Russian steel mill production costs, which thereby constituted “unfair competition” for American steel companies. In fact, the sharp depreciation of the ruble, and the steep declines in real wages in the Russian steel industry which followed the August 1998 financial crisis, are primarily responsible for increased competitiveness of Russian steel exports. Russian data also indicate that the Russian steel industry’s profitability has improved significantly since the August 1998 devaluation (Sotsial’no-Ekonomicheskoye Polozhenie Rossii, January-August 1999), which is difficult to square with claims of unprofitable exports. Also, because the U.S. steel industry is now reported to be enjoying record profits, the extent of the damage caused by Russian imports is also somewhat unclear.
…POINTING OUT THE COSTS OF NOT BEING A WTO MEMBER.