Global trade in steel is exhibiting unique features. Apparently, while the hike in numbers of protective measures adopted by WTO member countries against each other gives an impression of market shrinkage for trading purposes, the trade blocks in each region provide space for internal trade.
According to latest published data, direct steel trade undertaken by various countries outside the purview of trade blocks reached a volume of about 296 mt in 2013. The flow of steel trade within the trade blocks increased significantly at around 225 mt.
In this manner, we may soon reach a stage when steel trade within trade blocks is likely to exceed direct trade outside the blocks. What happens to multilateral trade that WTO promotes? If the trend gets strengthened as is evident from the spate of FTAs being signed, the relevance of WTO may become minimal in the coming years.
It is reported that Trans-Atlantic and Trans-Pacific treaties led by the US and the ASEAN treaty occupy the predominant share of global trade. India, China, Australia, New Zealand, Korea and Japan are not part of ASEAN. However, recent growth of trade among partners of the regional block has prompted ASEAN to approach all these countries to become a part of the block, with FTAs between them and also with ASEAN under Regional Co-operation of Economic Partnership (RCEP).
The ministry of commerce is quite enthusiastic in taking forward the FTAs for various sectors under RCEP as it feels the pacts will facilitate access of Indian exports, including service exports, into ASEAN and other five countries and also enhance investment from these countries into India.
This is indeed a holistic approach to India’s concern for increasing exports and investments in a highly competitive global market. But sectorally the story is different.
As regards the steel sector, FTAs under CEPA with Japan and South Korea have caused irreplaceable damage to the Indian steel industry by way of progressive reduction of duty (currently 1.9% against BCD of 7.5% and being reduced to nil duty by 2017). Around 65% of imports of HR coils, CR, plates, coated sheets and electrical sheets in the last fiscal were from these two countries only. It was much above the volume of imports from China, which was a threat till the other day.
The share of these two countries in imports came down marginally to 52% in the first four months of this year. It is