US Commerce chief says green steel pact would combat excess Chinese output

FILE PHOTO: Entrance to the U.S. Steel Great Lakes Works plant is seen in Ecorse, Michigan

By David Lawder

WASHINGTON (Reuters) - U.S. Commerce Secretary Gina Raimondo said on Tuesday the Biden administration was "extremely focused" on reaching a "green steel" arrangement with the European Union and other partners that disadvantages carbon-intensive steel from China and elsewhere.

Raimondo told an American Iron and Steel Institute conference in Washington that she was fully committed to ensuring that "Section 232" tariffs on global steel and aluminum imports, first imposed by the Trump administration, protect U.S. steelmakers and U.S. national security interests.

The Commerce chief said a green steel arrangement being negotiated by U.S. Trade Representative Katherine Tai will be a "game changer" for the industry's efforts to deal with Chinese excess steel manufacturing capacity. The negotiations are aimed at erecting trade barriers to steel produced with higher carbon emissions.

U.S. steelmakers are among the world's lowest carbon emitters, because of their heavy reliance on electric-arc furnaces that make steel largely from scrap, as opposed to smelting iron ore in coal-fired blast furnaces.

"China doesn't have the clean steel. We're pushing our industry to have higher environmental standards and cleaner steel, as is Europe," Raimondo said.

"We need a global steel arrangement that preferences higher quality, green steel and aluminum. That's the right way to disadvantage China in a way that lifts everything."

Raimondo declined to say whether she thought it was realistic to meet an October deadline for reaching a deal, referring such questions to Tai's office.

AISI President Kevin Dempsey told reporters that a key hurdle to overcome is the EU's demand that 25% tariffs imposed by former President Donald Trump under Section 232 of a 1962 trade law, including a quota agreement for EU producers, be ended, and effectively replaced by the green steel deal. The U.S. side, with backing from the trade group, wants to keep some trade restrictions on steel as part of that deal.

Dempsey said the Section 232 tariffs were still needed because of growing global excess steelmaking capacity, largely centered in China but expanding to other countries in Southeast Asia, including Indonesia, where Chinese steelmakers are building mills with government subsidies.

The Commerce Department this month proposed a new rule that would allow it to consider such transnational subsidies in its anti-dumping and countervailing duty cases.

Raimondo said such changes were needed to keep up with the changing nature of circumvention threats, and that it was important for the Commerce Department to maintain a strong trade anti-dumping and anti-subsidy enforcement capacity. She criticized Republicans' proposed debt ceiling cutbacks in discretionary spending to 2022 levels, which she said would result in "hundreds" fewer enforcement staff.

"We need every bit of enforcement capacity that we have and then some," Raimondo said. "So part of it is on us to be aggressive, vigilant and disciplined in our enforcement."

(Reporting by David Lawder; Editing by Ed Osmond and Paul Simao)