Via Teleconference
(October 30, 2021)
SENIOR ADMINISTRATION OFFICIAL: Taking questions, once again, as a reminder are [senior administration official], [senior administration official], and [senior administration official].
With that, I will kick it off by going to Justin Sink at Bloomberg.
Q Hey, guys. Thanks for doing this. I was wondering if you could kind of lay out — is this deal a tariff-rate quota? If you could detail, like, what the specific levels of steel that the EU is going to be able to export annually and talk a little bit about how this compares with the tariff-rate quotas that the U.S. agreed to with South Korea.
SENIOR ADMINISTRATION OFFICIAL: [Senior administration official], do you want to take that one?
SENIOR ADMINISTRATION OFFICIAL: I was thinking [senior administration official] would drop on. I don’t know if he’s — or, that he would jump in. And I don’t know if he is on the — on the line. If he is, he might be muted, so you might have to push *6.
SENIOR ADMINISTRATION OFFICIAL: Can you hear me now?
SENIOR ADMINISTRATION OFFICIAL: Yeah.
SENIOR ADMINISTRATION OFFICIAL: Yeah, we got ya.
SENIOR ADMINISTRATION OFFICIAL: Okay. Sorry about that. Yes, the deal is — involves tariff-rate quota, both with respect to aluminum and with respect to steel.
We’ll have more detailed information on the precise levels of the tariff-rate quota coming out later. But we did want to — these are set at, you know, levels that are consistent with — the historically sustainable levels that are consistent with recognizing distortions that have been in place in the market before and taking into account the interests of downstream users as well.
SENIOR ADMINISTRATION OFFICIAL: Okay, thank you. We’ll now go to Steven Overly.
Q Hi there. Thank you for taking the question. Can you elaborate on specific commitments that are being made regarding Chinese steel overcapacity and carbon-intensive steel? Is this an agreement to address those in the future, or are they taking specific action as part of this agreement today?
SENIOR ADMINISTRATION OFFICIAL: Thanks. This is [senior administration official]. I’ll jump in. So, what they’ve — what we’ve agreed to with the EU today is to negotiate an arrangement — which would actually be a global arrangement; we would invite other economies and partners to join — to address both global overcapacity as well as carbon intensity in the sector.
And the reason that it is future-looking was, you know, given our timeline and the interest in the near term of, you know, moving to a new phase in our relationship with the EU in this sector and the complexity, particularly on the climate side with some of these issues, we wanted to really take our time in those discussions and get it right and have something that can address these complex issues in the long term.
SENIOR ADMINISTRATION OFFICIAL: Great, thank you. We’ll now go to David Lawder from Reuters.
Q Hi. Thanks for taking the question. I just was wondering what needs to happen to finalize this deal? You know, is what you’re announcing today a final agreement, or is there still some details to be worked out? I’m just curious as to why not give us specific levels on the TRQs. You know, we have reported about 3.3 million tons nominally and that it also will extend some previously granted exclusions on certain products under the Commerce Department exclusion process — that those will also be sort of added in above that TRQ.
And also, does it require the European Union to take certain actions in order to prevent Chinese-made steel from being transshipped or minimally processed in Europe? This was a component of, sort of, the NAFTA agreement with Canada and Mexico to — you know, for them, you know, to ensure that they keep Chinese steel out of the (inaudible) through. And is there any anti-surge mechanism that allows sort of re-imposition of tariffs? Thank you.
SENIOR ADMINISTRATION OFFICIAL: Hi, this is [senior administration official] again. With respect to your last question on anti-surge mechanism, we had been taking into account the potential for surges throughout the negotiation of this deal, particularly in formulating the structure and administration of the tariff-rate quota. So, we have ensured, for example, that the time periods for the allocation of the quota are done in such a way as to minimize the prospect for surges.
We have also ensured that, with respect to steel, there is a melt-and-pour requirement. And by virtue of this melt-and-pour requirement, we hope to work with the EU to ensure that Chinese steel doesn’t get transshipped or doesn’t get utilized in European steel products that come into the United States and therefore — thereby allowing Chinese steel into the U.S. through the backdoor.
We have also maintained the exclusions process, both with respect to steel and aluminum. In the context of steel, the exclusions that have been utilized and entered the U.S. market in the past year will be given an extension for two years. For — yeah, for two years.
Sorry, is there another part of your question that I missed?
SENIOR ADMINISTRATION OFFICIAL: David, was there another part of the question that he missed?
All right. We’ll keep it moving. We’ll go to Corey Rangel.
Q Thank you. I just had two quick questions. You know, we had read an article that said that, you know, since these tariffs are protecting U.S. steel, that lifting them could hurt Biden in the Midwest elections. I’m wondering if you have thoughts on that. And also, does this run counter to climate change reforms since the steel industry contributes to carbon emissions?
SENIOR ADMINISTRATION OFFICIAL: If somebody is taking this one, they’re on mute.
SENIOR ADMINISTRATION OFFICIAL: Sure. This is [senior administration official]. You know, I would just note that modifications of these 232s actually begun under the (inaudible). I think this deal is just the first deal that actually gets something in exchange for U.S. steel companies and its workers.
So, I can’t speak to what — the political prognostications of that, but I do think it’s an important note to underscore.
And second, on the question of steel and climate, you know, I think, you know, obviously, the steel and aluminum industries are a major source of greenhouse gas emissions and one of the hardest to decarbonize alongside several other sources of carbon emissions.
So, you know, our point is that we expect to have a thriving, competitive U.S. steel industry complete with unionized plants on the other side of this energy transition. And I think that this agreement will be a very important step to getting there because, right now, our steel companies are the cleanest in the world, and they don’t get any credit for that. And this deal will turn that sort of low-carbon intensity across all modes of production into a source of comparative advantage.
And so, I think that’s exactly the kind of theory of climate progress that President Biden has in mind when he says, “When I think of climate, I think of good jobs.”
SENIOR ADMINISTRATION OFFICIAL: And if I could just chime in on top of [senior administration official]’s statement regarding the steelworkers.
I think what’s important to recognize is that we have been working closely with the unions and the companies throughout the — throughout these negotiations and taking into account, very clearly, the impact of any aspects of these outcomes on the industries. And that’s because, you know, we’ve been really using the Section 232 report as our North Star, making sure that we focus on the long-term viability of these industries as critical to our national security.
And so, that’s why we’ve included a number of elements such as, you know, these tough enforcement mechanisms, taking into account how these import volumes will affect capacity utilization, as well as making sure that when we look at how these tariff-rate quotas are administered, they’re administered in a way that they won’t threaten the operations of our steel and aluminum sectors.
SENIOR ADMINISTRATION OFFICIAL: Thanks. Well, that is going to be all the time that we have. Just a reminder: The first part of the call with the three principals was attributable on the record, and the remaining Q&A is attributable to “senior administration officials.”
Thank you all for taking the time and for bearing with us — with our tech issues. And thanks to all the Amanda Finneys out there. And hope everybody has a good night. Follow up with the comms folks if you have any further questions. Thanks.
8:07 P.M. CEST
