Proposed U.S. import quotas on Venezuelan steel threaten to spark a trade war between the two countries, according to officials here
At issue is a U.S. demand that Venezuela limit its steel exports to the United States to 110,000 metric tons per year, down from 1984 sales of 550,000 metric tons. Venezuela has proposed a limit of 400,000 metric tons.
Already, state steel company Siderurgica del Orinoco (Sidor), which accounts for roughly half of Venezuelan steel sales to the United States, is looking for substitutes for U.S. suppliers that sell the company an estimated $150 million a year in raw materials and spare parts, company President Cesar Mendoza said.
"We are looking for new suppliers who are ready to buy steel from us," he said, adding that the policy was a "state decision." Such a move could cut into the $4 billion of products U.S. firms are expecting to sell to Venezuela this year.
Venezuelan President Jaime Lusinchi, in his annual speech to the Venezuelan Congress in mid-March, assailed the "obstinately protectionist policies" of industrialized countries and warned that Venezuela "would have to take action in relation to those steel products that we import from the United States " if the quota policies are continued.
Lusinchi, who is in the United States on an unofficial visit, reportedly brought the matter up with President Reagan in a phone conversation this week.
At the end of March, Interalumina, the state alumina company, announced it was ending talks to buy the Martin Marietta alumina plant in St. Croix in part because of the U.S. import restrictions.
For this oil-rich country, the huge investments it has made in developing a steel plant represent important efforts to diversify exports and earn the hard cash it needs to service its $34 billion debt.
Sidor only began to export in significant quantities in 1983 after a sharp devaluation slashed production costs. In 1984, about 700,000 metric tons of its production of 2.5 million metric tons was exported. If the U.S. quota is adopted, Sidor's participation in what it considers to be its natural market will be reduced to minuscule proportions, Mendoza said.
The issue began last December when U.S. Steel Corp. filed suit alleging that eight minor producers, including Venezuela, were subsidizing steel exports and in some cases engaging in dumping. At the time, it was thought that the suit would be dropped if a reasonable quota was negotiated.
But a settlement was complicated last month when U.S. Steel filed additional charges that two other products are subsidized. Meanwhile, the U.S. Department of Commerce found that the majority of imports from Sidor steel were subsidized by 72.6 percent.
The United States calculates quotas on the basis of a nation's average exports over the last two to three years. Because Venezuela only recently started to export, it argues that such a quota is unjust.
The findings on Sidor's subsidies, as well as the method for calculating the proposed quota, have been bitterly contested by officials who feel that it is unjust to use the same yardstick in measuring the steel industry of a developing country such as Venezuela and those of industrialized countries.
"A nascent steel industry like ours needs state aid to arrive at production levels that will allow it to operate at an efficiency like that of industrial countries," said Mendoza. "What is unjust is that the United States is treating developing countries according to the same criteria as developed countries."