Poland and EU talk about protecting steel industry

A monitoring system to protect the domestic steel industry from imports will wait for Poland and the European Union to complete accession negotiations on state aid and competition, said Andrzej Szarawarski, secretary of state for steel at the Economy Ministry. Steel executives are worried that the measures, which will probably not be settled before June, will be too little too late. "It's all right to go on with these talks and discussions but steel pipe production in Poland will have ceased to exist by the time they are over," said Roman Kompała, vice president of Katowice steel mill Huta Jedność, which specializes in hot- and cold-rolled pipes. "Imports are streaming into Poland from every border ... I have no doubt that if the EU cannot export its products to the West, it is powerful enough to send its products to the East."

Poland's steel industry, with debts of more than zł. 8 billion ($1.95 billion), is suffering from increasing imports, which in the first nine months of 2001 rose to 45% of all steel sold domestically from 35% in 2000. Since the majority of steel produced in Poland is sold on the domestic market, the growth of imports adds to the industry's overcapacity and swells production costs, making Polish products less competitive. "We will introduce a system to monitor import levels of different categories of steel products from particular suppliers in the same way that the EU does," Szarawarski told the WBJ last week. "But this will have to wait until the end of negotiations with the EU as we have to ensure this legislation is EU compliant." Talks affecting the steel industry are slated for completion by the end of June this year, said Ewa Haczyk, spokeswoman for the Committee for European Integration (UKIE). Protective measures for the steel industry, along with Special Economic Zones, are two problem areas that must be resolved during Poland's ongoing accession negotiations on competition policy. To close the chapter on competition the government's steel industry restructuring program, which includes the creation of steel conglomerate Polish Steel (PHS), must first be completed in a separate round of talks with the European Commission. "We are doing everything we can to make this happen but (Poland's chief negotiator Jan) Truszczyński does not rule out that it may not be possible to complete the negotiations by June, whereby they would have to be completed during the Danish presidency," she said referring to the July-December period when Denmark will hold the EU's rotating presidency.

But for Polish steelmakers, measures to reduce imports may come too late. Concern over imports grew among Poland's steelmakers after the U.S. introduced definitive safeguard measures in the form of an increase in duties on imports of 8-30% on certain steel products from countries that supply more than 3% of U.S. steel imports, including the EU, Japan, Russia, Ukraine and elsewhere for three years starting April 4. With some of the world's largest and most efficient steel producers locked out of the U.S. market, Polish steelmakers fear the overspill will soon sweep the market from under their feet. The tariffs sparked an angry reaction from the EU, which challenged the U.S. decision at the World Trade Organization, a process since joined by Switzerland, Japan, Korea, Venezuela, Norway and China. The EU insists that under WTO rules, the U.S. must pay compensation of up to $2.5 billion, the value of annual EU steel exports to the United States affected by the tariffs.

"Until now all member countries have used the WTO as a means of liberalizing trade, lifting barriers," Szarawarski said. "The U.S. has demonstrated a different view ... introducing instruments that we are moving away from - the protection of one's own market at the expense of suppliers." Last week, after failing to secure compensation the European Commission introduced tariff rate quotas on 15 categories of steel products, resulting in tariffs of 14.9-26% on all imports above set quotas. Szarawarski said that the next round of WTO negotiations, which will begin in July and last until 2005, will also be crucial for the future of the Polish steel industry. "Poland is very interested in the development of rules on international trade, so what has happened will not reduce the role of the WTO but increase it," Szarawarski said. "Either we continue with the liberalization of trade ... or we enter a period of tariff wars or protection of domestic markets, the introduction of prohibitive tariffs and export subsidies that will destroy international trade."