OECD plans to reconvene steel subsidy talks in 2005

Purchasing Magazine Online: “After two years of high-level talks, negotiators from the world’s major steel-producing nations failed to reach an agreement to cut subsidies for steelmaking firms. So, the talks to end controversial steel subsidies worldwide broke down this summer for the third straight year, indicating an unwillingness of countries to end handouts to a critical industry in spite of growing profitability among steelmakers.

Delegations from 39 steel-producing nations have been meeting since 2001 to craft an agreement that would end market-distorting subsidies, such as tax breaks and low-interest loans. The three countries involved agreed to resume talks next year hosted by the Organization for Economic Cooperation and Development (OECD) in Paris, but some are raising questions as to whether governments or trade bodies will enact additional protections while the window is open to do so.

The main sticking points to eliminating steel subsidies remains what qualify as subsidies and whether developing countries, such as Brazil, Turkey, India and even now booming China, should be able to retain certain subsidies, such as government assistance in closing inefficient capacity, assistance in research and development, and solving environmental problems.

‘There is a broad understanding that developing countries should get some special treatment,’ says Herwig Schlogl, deputy secretary-general of the OECD in a telephone interview. In spite of the breakdown, Schlogl says he ‘is heartened’ that all countries have agreed to resume talks next year. “

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