Politicians probably need more time to agree on the details
In October 2023, EU and the US failed to reach an agreement on the Global Agreement on Sustainable Steel and Aluminum Production (GSA). Experts believe that the parties should overcome their differences, and the agreement, if it is reached by the end of the year, will be partial and will primarily concern the system of tariff quotas, writes Fastmarkets.
«The actual failure of the negotiations was unexpected,» said Dr Todd Tucker, director of industrial policy and trade at the Roosevelt Institute.
He noted that during the two years of negotiations, the USA was approaching the position of the EU. In particular, he pointed to reports that the United States has revised its proposal to complement, not replace, Europe’s CBAM.
Tucker believes that given the political expediency and readiness of the EU to meet, an agreement could be concluded.
Lewis Leibovitz, an international trade attorney, told Fastmarkets that the two sides wanted to settle their differences but were unable to do so.
«Each side has its reasons, but the inability of the US and the EU to find a compromise on their differences in the midst of a global crisis is a disappointing signal,» he noted.
Negotiations to reduce the carbon intensity of imported steel could be difficult, with some believing they are likely to be deadlocked for at least the next two years, the sources said.
However, according to Margaret Hansbrough, CEO of SteelWatch, both the US and the EU want to ensure their economies thrive under climate-friendly trade policies like the GSA. However, the details are quite difficult to agree on, and the fact that politicians have more time for this is a good sign.
Hensbrough emphasized the importance of cooperation between the two countries in the area of trade policy, which «sends signals of demand for green steel» and paves the way for other countries to «benefit from trade if they also decarbonize their heavy industries quite aggressively.»
At the same time, it is important for American steelmakers that the system of tariff rate quotas (TRQ) for European steel be maintained while the negotiations continue.
Todd Tucker noted that it is still unclear what the next path will be. The EU demands deeper coordination with the US on a number of issues of the green energy transition. The Steel agreement would be an advance for further cooperation. However, the fact that the parties failed to reach it in the least contentious area makes success less likely for areas involving more complex issues.
A source familiar with the situation said that while the two sides have strong incentives to reach some sort of agreement by the end of this year, the deal, if struck, is likely to be partial, mostly covering the TRQ system and not including a carbon component.
As GMK Center reported earlier, the United States will continue suspending Section 232 tariffs on European steel and aluminum if the parties need more time to reach a steel deal. This was reported by the US ambassador to the EU, Mark Gitenstein, at the end of October.