Senior government officials from several major steel-producing economies are finishing up meetings this afternoon at the Organization For Economic Co-Operation And Development (OECD) in Paris. The two-day series of meetings began yesterday, December 18, 2002.
Meeting participants said they will immediately begin developing the elements of an agreement for reducing or eliminating steel trade-distorting subsidies at all levels of government.
In addition, they agreed to strengthen the peer review of capacity developments and to examine various options to facilitate plant closures, in consultation with industry representatives and multilateral financial institutions, taking the different situations in participating economies into account.
The discussions indicated that the underlying situation in steel remains serious, notwithstanding a few recent signs of recovery in certain markets. Market conditions have improved in some areas and some restructuring is underway. However, the recovery is viewed as fragile, with many firms continuing to struggle to maintain or return to profitability. This situation has implications for trade in a variety of steel products and the persistence of inefficient excess capacity world-wide has contributed to volatility in steel trade.
The decisions taken by the group include:
Capacity and Industry Restructuring
Peer Review: The High-Level Group (HLG) reviewed capacity developments, noting that around 140 million tonnes of capacity could be closed during 1998-2005. They agreed that the intergovernmental peer review of steel capacity developments and industry restructuring will be continued, with improvements to ensure more accurate, complete, and timely reporting, and more thorough review. Industry association in the process will be encouraged, as appropriate, where competition considerations do not preclude this. This would include an exchange of views on past and present market conditions in support of the intergovernmental discussions on capacity developments. While all economies will be reviewed, examination will initially focus on those where significant changes are expected.
Facilitating Closures: The HLG instructed its Capacity Working Group (CWG) to evaluate the feasibility of options for helping to facilitate plant closures, including the costs associated with permanent plant closures, where costs tend to impede such closures.
The CWG may invite input and may examine financing, including the funding of closures. It will identify the types of costs associated with closures and examine mechanisms that could provide incentives for plant owners to close inefficient facilities.
There was agreement by the HLG that there are two areas of high concern:
Subsidies and related government supports
There was a general consensus to make work to strengthen disciplines on subsidies should have a high priority and should begin immediately, leaving open the option of taking up steel-specific issues related to trade remedies at a later stage.
Subsidies and Related Government Supports: The HLG instructed the Disciplines Study Group (DSG) to begin work on an agreement for reducing or eliminating trade-distorting subsidies in steel provided at all levels of government, taking into account existing multilateral agreements and mechanisms, as well as the needs of developing economies. The group will proceed with this work on an expedited basis, holding an initial meeting on February 24 and 25, 2003. The DSG will explore how the results of this work should be fed into the WTO framework.
Voluntary Commitment: Participants agreed to consider - for a later decision - a voluntary commitment to refrain from introducing new subsidy programs that would maintain or enhance capacity
The High-Level Group intends to take evaluate the conclusions of the two working groups in 2003. The peer review process, established to look into inefficient capacity and related industry restructuring, should continue beyond 2003, as long as participants find it beneficial.
The meeting was held under the Chairmanship of Mr. Herwig Schlögl, Deputy Secretary-General of the OECD and was the fifth such meeting.
Countries represented in the meetings included:
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