Lifting of U.S. steel tariff will affect RI

Sari P. Setiogi, The Jakarta Post, Jakarta

Indonesian steel exports to the U.S. will be negatively affected if the latter government lifts its temporary import tariff on the commodity, as ruled by the World Trade Organization (WTO), according to an official of a local industry association.

"If the tariff is lifted, we shall face tougher competition from European Union, Japanese and South Korean producers," executive secretary of the Indonesian Steel Pipe Manufacturers Association (Gapipa) Untung Yusuf told The Jakarta Post on Tuesday.

The WTO issued on Monday a ruling that U.S. steel tariffs violated global trading rules. Although U.S. President George W. Bush immediately expressed disagreement at the ruling, there has been growing speculation that the administration would, in the end, follow the WTO decision.

The U.S. government imposed temporary three-year tariffs of up to 30 percent on most foreign steel products to protect ailing U.S. steel mills and their workers.

But Untung said that exports from Indonesia and other developing countries were not affected by the controversial ruling.

"Indonesia receives exceptional treatment from the U.S. as a developing country, so the tariff policy does not have any impact on our exports," he said.

The European Union initiated the move against such safeguard measures and was later joined by Brazil, China, Japan, New Zealand, Norway, South Korea and Switzerland in a complaint lodged at the Geneva-based WTO last year.

The European Union has threatened to impose US$ 2 billion in retaliatory sanctions if the steel tariffs are not lifted, while Japan is also considering sanctions as well.

According to Untung, Indonesian steel exports to the U.S. reached about $10 million per year. He expected the export value next year would remain the same.

But he was worried about the recent 60 percent increase in freight costs, which make exported local steel products more expensive in the U.S. market.

"The hike makes our exports less competitive," said Untung. However, he said the results could only be observed after the first quarter next year.

The price of Indonesian steel products is around $400 per ton on average.

Untung said that the higher freight cost might push the sale price to around $500 per ton.

Indonesian steel output totals 2.89 million tons per year, with some 2.5 million tons produced by state-owned PT Krakatau Steel.