WTO Put Brake on US’ Protectionist Trade Policy against Korean OCTG

The Ministry of Trade, Industry & Energy of Korea announced on January 15 that WTO’s final decision was made on January 12 regarding anti-dumping disputes over oil country tubular goods (OCTG) between South Korea and the United States.

In November last year, the Dispute Settlement Body (DSB) of the World Trade Organization (WTO) held a meeting and determined that anti-dumping duties the United States imposed on South Korean OCTG violated the WTO Agreement. The United States did not lodge an appeal and the determination has become the final decision.

The U.S. Department of Commerce imposed the anti-dumping duties in July 2014. The duties imposed on the OCTG exported by Hyundai Steel, Nexteel, Seah Steel, Husteel, Iljin Steel and Aju Besteel ranged from 9.9% to 15.8%. In April last year, the Department of Commerce adjusted the rates to up to 29.8%.

The South Korean government brought the case to the WTO and the DSB ruled in November last year that the U.S. violated the WTO Agreement by adjusting the tariff rates based on multinational companies’ higher profit rates instead of those of the South Korean companies. The United States could lodge an appeal within 60 days but did not do so.

The U.S. now has to comply with the final decision of the WTO immediately or within a reasonable period of time. According to the WTO Agreement, the period can be determined by agreement or mediation between the interested parties and cannot be longer than 15 months in principle. The Ministry of Trade, Industry & Energy is going to keep working with the WTO so that the U.S. complies with its decision properly and without delay. “The decision of the WTO is expected to be of great help against the trade protectionism spreading throughout the world these days,” the ministry explained, adding, “South Korean OCTG manufacturers’ business conditions will be significantly improved once the U.S. completes the implementation of the decision.”

In the meantime, the United States is scheduled to determine on January 26 and February 2 whether or not to apply safeguard measures against solar cells and washing machines imported from South Korea, respectively. In addition, the U.S. determines within this month whether to apply Section 232 of the Trade Expansion Act of 1962 to steel imported from South Korea.

The U.S. International Trade Commission (USITC) determined on October 31 last year that a safeguard measure would be necessary to protect American solar cell manufacturers. At that time, the USITC recommended President Donald Trump to impose a tariff of 15% to 35% on photovoltaic modules for four years to come and set annual tariff rate quotas (TRQs) for the same period when it comes to solar cells to impose an import tariff of 15% to 30% on the amounts exceeding the quotas. Its recommendations also included a tariff of up to 50% on washing machine imports exceeding a 1.2 million unit quota and 20% in the first year, 18% in the second and 15% in the third on the washing machines included in the quota.

The U.S. is also claiming that Section 232 of the Trade Expansion Act of 1962 should be applied to South Korean steel as Chinese steel is being indirectly exported to the U.S. via South Korea. The section of the act is to protect the United States from any imported product that can be a threat to its national security and constitutes a very powerful tool of trade protectionism as it can be implemented even without prior examination of actual losses.

In the negotiations for KORUS FTA revision, in the meantime, the United States is demanding that the South Korean government relax its exhaust emission regulations on cars exported from the U.S. to South Korea and the ratio of American auto parts in those exported from South Korea to the U.S. be raised to at least 50%.

Under the circumstances, South Korean government officials are meeting with those in the U.S. government, the Congress and various American industries to talk over the matters. For example, Deputy Minister for Trade Kang Sung-chun flew to the U.S. on January 9 and explained, “Only 2.4% of the steel products exported from South Korea to the U.S. used materials from China in 2016 and the South Korean government is convinced that a dialogue-based solution is much better and more effective than unilateral regulations.” He continued to say, “According to our estimates, 88,000 jobs are likely to disappear once a safeguard measure is implemented in the photovoltaic industry.”