Posted on 22 Dec 2016
Japan is seeking talks with India in hopes of persuading New Delhi to repeal its steel safeguard, which was meant to protect against cheap Chinese imports but has caught Japan in its crossfire as well.
The request, made under a World Trade Organization agreement, is the first of its kind Japan has made to India. If the negotiations go poorly, Japan will ask the WTO to settle the dispute.
India's safeguard measure -- which hits certain imports below a set price with an additional tariff of up to 20% -- targets hot-rolled steel coil, used in automobiles and building materials. Japan exported roughly 662.4 billion yen ($5.63 billion) worth of the coil last year, with about 56.8 billion yen's worth bound for India.
Governments can guard against cheap imports in two ways: slapping anti-dumping duties, which target certain businesses' products, or invoking safeguards, which protect home industries against sudden rushes of imports. Safeguards do not discriminate its targets, slapping tariffs on imports regardless of origin.
"India's cavalier policy move caught us right in the splash," said a Japanese steel company executive, speaking of the tariffs imposed on Japanese steel under India's safeguard. In October, the Japan Iron and Steel Federation (JISF) petitioned the Japanese government to negotiate with India.
Fears of a wave of international protectionism spurred by China's steel overproduction were discussed at this year's G7 and G20 summits. Facing mounting pressure, China promised to cut its production capacity by 100 million to 150 million tons' worth over the next five years. "China's response has come a long way this year," said JISF Chairman and Nippon Steel & Sumitomo Metal President Kosei Shindo.
But once turning, the gears of protectionism are difficult to stop. In the past few years, countries such as Indonesia, Malaysia and the Philippines have enacted safeguards against China's steel glut. The trend is spreading even as far as Egypt and South Africa.
Japan now faces a delicate balancing act, as it prods India to relax its safeguard with one hand and slaps anti-dumping measures on chemicals from countries such as China with the other, protecting its home industries while trying to fight protectionism abroad.
