AMSA vs The Steel Downstream – It Is Time To Scrap The 10 Percent Customs Duty

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According to news reports, AMSA is appealing to the steel downstream to join it in a united lobbying effort for higher levels of tariff protection on both primary and value-added steel products. 

Gerhard Papenfus, Chief Executive (NEASA)

The fact that AMSA even contemplates obtaining support from the steel downstream for any of the protectionist measures mentioned in the news reports, just illustrates the extent of AMSA’s arrogance, their disconnect from what is happening within the ranks of their downstream customers and the anger amongst downstream manufacturers – for both the 10 percent customs duty already granted (which serves as a slow poison causing the gradual demise of the Steel Industry), aggravated by the ill-conceived attempt to secure a further 30 percent safeguard duty (which, should it ever be introduced, will ensure the rapid demise of the Steel Industry).

There must be no uncertainty with AMSA that there won’t be any support from the downstream for any of the protectionist measures AMSA has in mind.

Since, by AMSA’s own admission, the advantages of the 10 percent customs duty (to AMSA) were insignificant, and in light of the preliminary indication by the International Trade Administration Commission of South Africa (ITAC), that there is no justification for a safeguard duty (AMSA applied for 30 percent safeguard to be introduced), AMSA now canvasses for downstream support as part of their increased efforts to secure further protection.

AMSA would be well advised that, if they want to engage with the downstream on this issue, they should start off by entering into discussions with NEASA, the only organization openly against the AMSA protectionist initiatives, and the largest representative organization of downstream steel manufactures. NEASA has already obtained the support of over 2000 companies who rebelled against both the 10 percent customs duty as well as the 30 percent safeguard duty. If AMSA’s new strategy is one of canvassing support for its downstream hostile protectionist agenda, NEASA is ready to further mobilise the steel downstream.

AMSA’s concern about the effect of imports on the downstream is merely a matter of window-dressing in an attempt to divert attention from its own, downstream hostile protectionist effort. For reasons, briefly listed below, protection of imports to the downstream is simply impossible and will never be supported:-

Many downstream products are already protected at the bound-rate. (The bound-rate is the maximum protection allowed by the World Trade Organization, to which South Africa is a signatory. For example, a steel downstream finished product that has a tariff of 15 percent, had protection of 15 percent until the 10 percent protection on primary AMSA steel was introduced, the result being that the 15 percent has effectively been reduced to five percent. Therefore, the introduction of duties on primary steel produced by AMSA, almost decimated the protection the downstream industry previously enjoyed.)

In canvassing government’s support for the 10 percent, AMSA did the downstream a tremendous disservice and thereby illustrated their absolute insensitivity for the interests of the steel downstream.

Protecting the downstream is an administrative impossibility. There are thousands of products and the time, effort and money, even if subsidized, will never be sufficient and will therefore not be feasible.

Custom control of so many products will be practically impossible and it will foster a haven for corruption, which will only benefit criminals and further enhance the demise of honest downstream manufacturers.

AMSA’s offer to assist the downstream in this regard, comprising thousands of companies, is therefore nothing short of being ridiculous and cannot be taken seriously.

AMSA admits that the 10 percent customs duty only had an insignificant effect on imports. However, while it brought no benefit to AMSA, downstream importers were severely prejudiced by it. The preservation of the 10 percent customs duty therefore makes no sense and NEASA hereby officially requests AMSA to withdraw their support for this duty and to request ITAC to advise the Minister of Trade and Industry to scrap it. This is the only manner in which AMSA can illustrate real concern for the steel downstream. 

AMSA is right in saying that if there is no steel downstream, that there will be no steel upstream and vice versa. However, if in using the term ‘upstream’ AMSA refers to itself, this statement is not entirely correct. For the steel downstream to prosper it needs access to the cheapest available high quality steel and AMSA, by being successful in convincing government to protect its antiquated steel mills by means of duty protection, is denying the downstream that opportunity. In that sense AMSA’s interests are directly opposed to that of the steel downstream, and the downstream may well prosper without AMSA.

For the downstream it is imperative, for its own survival, that AMSA invests in the construction of a modern steel mill in South Africa in order to effectively compete with steel imports. Failing this, AMSA will simply not survive in the long term. The ‘winds of change’, confronting the global steel trade, will simply eventually bring about AMSA’s demise.

The danger of any protectionist measures, those already introduced as well as those AMSA is continuing to canvas support for, is simply delaying the inevitable, and in the process causing irreparable harm to the steel downstream. NEASA will do whatever it takes to prevent this from happening.

 

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