Ag Groups Fear Steel Tariffs

WASHINGTON (DTN) -- Farm groups are cautioning the Trump administration not to open a "Pandora's Box" by claiming restrictions on steel and aluminum are needed to protect "national security."

Eighteen agricultural groups wrote to Secretary of Commerce Wilbur Ross on Tuesday, stressing that such a move would be a disaster for global trade, "and for U.S. agriculture in particular."

The Trump administration is expected to decide any day whether to place tariffs on steel imports, stemming from an April investigation announced by the Commerce Department over whether those imports are harming U.S. national security. It's a rare argument for a major global power to make in a trade case.

The farm groups wrote to Ross that it would be "a short-sighted mistake" to restrict imports based on national security claims. The farm groups called on Ross to consider the broader implications for the economy "and avoid igniting a trade war through new restrictions on steel or aluminum trade ..."

Nick Giordano, vice president and council for global government affairs at the National Pork Producers Council, said farm groups recognize there is an overcapacity of steel and aluminum in the world. Farm groups and other industries are concerned, however, that the Trump administration's plan would boomerang against other exporting industries. Giordano also pointed out that roughly 25% of pork is exported, and in the case of a crop such as wheat, as much as 50% is exported.

"When you are an export-sensitive industry, there's a lot of concern it could translate into retaliation," Giordano said.

The letter to Ross notes that several of the countries that export steel to the U.S. also happen to be large importers of U.S. agricultural products. "The potential for retaliation from these trading partners is very real," the letter stated. "Short of explicit retaliation, these countries may also stall efforts to resolve current trade issues if they believe they have been unfairly targeted over legitimately traded products."

The Financial Times reported last week that the European Union was already working on a list of products to target for possible retaliation, which included "whiskey, orange juice and dairy products." EU officials made it clear at the G-20 summit last week they would respond swiftly if President Donald Trump takes action, which would affect as much as $12 billion in European exports to the U.S. (http://on.ft.com/…)

Still, Trump has vowed since last year's campaign to go after China for dumping steel on the world market. Though China is roughly 10th in the volume of steel exports to the U.S., Trump argues China's actions directly affect U.S. steel manufacturers.

The U.S. is the largest importer of steel in the world, importing 30.1 million metric tons last year. Still, that was down 25% from two years ago. Canada, Brazil, South Korea, Mexico, Turkey and Japan are the largest steel exporters to the U.S. and collectively account for about 65% of imports. (http://bit.ly/…)

President George W. Bush placed a tariff of up to 30% on steel imports in March 2002, but did not use the national security argument. The European Union threatened to place billions in tariffs on various products. The EU also sued the U.S. In the World Trade Organization and was joined by other countries as well.Canada and Mexico, despite being major steel exporters, were exempted because of the North American Free Trade Agreement. Bush rescinded the tariffs in late 2003.

In their letter Tuesday, farm groups stated there's a risk that if the U.S. starts restricting steel and aluminum imports because of "national security concerns," then it's likely other countries would follow suit. If the U.S. is going to claim national security as a reason to reduce imports of a given product, then others will do the same, the farm groups wrote. Giordano reiterated that fear.

"It's not difficult to then say food is a national security item on us, and we're going to put restrictions on the following products from the following countries," Giordano said. "So there is a lot of concern from U.S. food and agriculture."

Trade rules do allow trade restrictions based on national security, but the farm groups noted that argument is rarely used. The farm groups called it a "Pandora's Box" that, if opened, would devastate global trade. "No country can dictate another's national security needs, so now every country with a sensitive industry would know that it could follow the example of the United States and find a national security reason to circumvent trade commitments, no matter how flimsy the reason might be."

Groups signing the letter included: the American Farm Bureau Federation, American Soybean Association, National Association of Wheat Growers, National Barley Growers Association, National Cattlemen's Beef Association, National Corn Growers Association, National Association of Farmer Cooperatives, National Milk Producers Federation, National Pork Producers Council, National Sunflower Association, National Turkey Federation, U.S. Apple Association, U.S. Canola Association, U.S. Dry Bean Council, U.S. Wheat Associates, U.S. Grain Council, USA Dry Pea and Lentil Council, and USA Rice Federation.

Chris Clayton can be reached at Chris.Clayton@DTN.com

Follow him on Twitter @ChrisClaytonDTN

(ES/BAS)

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