After US' 50% tariff blow, India now faces EU heat on steel quotas

Mint

19 hours ago

New Delhi: The European Union (EU) has put India's individual quota on hold and placed it under a 'pooled quota" for exporting certain kinds of steel products to the 27-nation bloc, dealing a double whammy to a sector already reeling from America's 50% tariff.
The latest move is meant to correct imbalances in the current quota system by restoring separate duty-free country-specific quotas for major exporters like Ukraine, UK, Türkiye and Korea.
However, countries like India, which fall under an 'other countries" category, must share a pooled quota of around 12,500 tonnes with others, including China and Vietnam among others.
The EU's notification was submitted to the Committee on Safeguards at World Trade Organization (WTO) on Wednesday.
The proposed changes will come into effect from 1 July and remain in effect till 30 June 2026. This shared quota, known as the 'residual quota," applies to 'product category 17', which covers 'angles, shapes and sections of iron or non-alloy steel."
Also read US rejects India again at WTO: Response to auto tariffs plea mirrors rejection over steel, aluminium dispute
Under the pooled quota mechanism, any country in the pool can export any quantity. The amount a country exports is deducted from the overall quota of the pool. This means a single, large producer can quickly exhaust the full quota, analysts said.
However, any country in the pool that exports the product once the 12,500-tonne limit has been exhausted attracts a 25% tariff on that additional amount.
The figure for Indian exports of these particular products to the EU was not immediately available. However, In FY25, Indian shipments of articles made from iron or steel, which include 'category 17' products, stood at $1.83 billion. This is of major significance for India because it is in the final leg of discussions for a free trade agreement with the 27-nation bloc.
The EU had previously removed country-wise quotas for these products in 2022 after Ukraine—then the top supplier—was unable to export due to the war with Russia. That led to a globalized system where all countries could export under a common quota, as per the EU notification.
Read this India likely to seek removal of US steel tariffs in trade talks rather than immediate retaliation
Presenting New Delhi's stand, a senior official said that India will discuss the issue with the EU, as the notification has provided a window for consultations from 12 to 19 June.
The decision may have mixed consequences for Indian exporters.
'Being placed in the third-country quota alongside China puts us at risk of losing our share, as China (alone) could exhaust the allocation early," said Pankaj Chadha, Chairman of the Engineering Export Promotion Council (EEPC), a body under the commerce ministry. Chadha is also managing director of Jyoti Steel Industries.
These changes notified by the EU include removal of a 15% cap on any single country's share of the pooled quota.
While the pooled quota ensures some continued market access, it poses a significant disadvantage when compared with countries that now enjoy exclusive duty-free quotas, experts said.
'The continued access to residual quotas offers a limited but important channel for Indian steel exports. The latest adjustments also provide an opening for India to press for full access without quotas under the ongoing India–EU free trade agreement negotiations," said Arun Kumar Garodia, director, Corona Steel.
Also read Govt may harness public sector undertakings to drive green steel consumption
'The EU's latest revision of its steel import safeguards may appear targeted at restoring trade balance, but in practice, it entrenches discrimination against countries like India that lack dedicated quotas," said Ajay Srivartava, co-founder, Global Trade Research Initiative (GTRI).
'By reintroducing exclusive duty-free quotas for the UK, Türkiye, and South Korea while limiting others—including India—to a small, shared residual quota, the EU has effectively locked India into a second-tier access regime," he said.
Under the EU's revised safeguard system for steel, Ukraine has been allocated over 31,600 tonnes per quarter for these steel products, the UK 27,500 tonnes, Türkiye 22,900 tonnes, and South Korea 5,300 tonnes each quarter.
The negotiations for an FTA with the EU are at an advanced stage and are likely to be signed in the next couple of months.
Queries emailed to the commerce ministry remained unanswered till press time.
And read Goyal begins France, Italy visit to deepen trade ties; India looks to fast-track EU FTA, global alliances