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Russia: U.S. Commerce Secretary Optimistic About Steel Accord

Washington, 15 February 1999 (RFE/RL) -- U.S. Commerce Secretary William Daley says he is optimistic that Russian and American negotiators will reach agreement this week to allow continued sales of Russian made steel in the United States.

Daley said, however, that the middle of this week is the deadline for such an agreement before a Commerce department finding on whether Russia has been selling hot rolled steel on American markets below the cost of production, a practice called dumping.

U.S. steel companies and worker's unions filed charges against Russia, Japan and Brazil last September, alleging that all three were dumping such huge amounts of steel at below cost that it was putting U.S. employees out of work and forcing American steel plants to shut.

On Friday, the Commerce department issued what is called a preliminary finding that Japan and Brazil have been dumping steel on U.S. markets. It delayed its finding on Russia, however, partly because of difficulty in working out the figures. While Russia has been moving toward a market economy, under U.S. trade law it is still classified as a non-market economy. And that requires complex calculations for whether a product is being sold below cost or not.

But Daley said the delay was also appropriate because U.S. and Russian negotiators, who have been meeting secretly for several months now at Moscow's request, are working on two agreements -- one to cover Russia's exports of hot rolled steel to the U.S.-- an agreement which would halt the dumping action -- and a second on a broader range of steel products.

Russia sold nearly five million tons of steel products to the U.S. in 1998, a more than 58 percent increase over 1997. Hot rolled steel accounted for over 3.5 million tons of that steel and those imports were up over 92 percent from 1997.

It was that rush of hot rolled steel into U.S. markets -- at prices which continued to fall because of the ruble's decline against the dollar -- that prompted American producers to call foul.

At heart, the dispute arose because it was one of the small benefits of the ruble's decline. As the ruble fell from six to the dollar to 23 to the dollar, the cost of buying goods produced in rubles with dollars fell over 75 percent.

In an effort to stop the tide of Russian steel, the commerce department declared the dumping complaints "critical." That meant that if the department found that Russian steel had been dumped, the retaliatory duties would be retroactive on steel imported as early as last November. The effect was immediate and Russian steel sales to the U.S. fell by 90 percent in December.

Once the Commerce Department has ruled that dumping has taken place, then the case goes back to the International Trade Commission (ITC), which then must determine if U.S. firms were damaged by the dumping. It's finding usually comes two or more months after the Commerce department's action. But, because the case is "critical," the duties -- which would be at least 100 percent on Russian steel -- would be imposed retroactively.

Daley said the U.S. is talking to Russia because it was the only one of the three nations which asked to work out a broader agreement. Until Friday, however, the U.S. has refused to acknowledge that the talks were even underway.

Daley said it's important to work out an agreement because of Russia's dire economic straights and the fact that the steel industry makes up about seven or eight percent of the country's GDP (gross domestic product). "It is a major part of the economy and the ability of that country to survive," he told reporters Friday.

He said the U.S. had to act, however, because "an enormous amount" of steel came from Russia and "very little" of it went to Europe.

If the agreements can be worked out, said Daley, it will be good for American workers and good for the U.S.'s overall economic relationship with Russia.