There may be only some exceptional few who are yet to be convinced that crisis in steel industry - seen recently one after another in quick succession - are the results of excess capacity in the industry worldwide.

Therefore, there is larger acceptance of the urgency to have these matters so important to the survival of the industry brought to the negotiating table. It is generally believed that once the worldwide excess capacity is taken care of by means of pure liquidation, much of the problems of the industry would be sorted out.

These ideas were mooted in the past when Multilateral Steel Agreement (MSA) was taken for discussion. There were fewer takers as many thought that these are ideas of the developed countries to get steel capacities in the developing countries chopped off so as to save the ailing industry in the developed world. It certainly did look like that. There were many other provisions in the proposed agreement which were controversial. The US is talking about bilateral talks. Although a little unexpected, it is from this country, after seeing its domestic demand dropping sharply in the last few months with imports rising at phenomenal pace simultaneously, that many unpopular measures and is left with a few basic options to safeguard its steel industry.

One, the country's industry files trade suits in large numbers to keep foreign steel at bay. Two, the government threatens the steel exporting nations in the rest of the world with strong measures against `unfair' trade but does not rush for any concrete action. Both are unpopular measures.

The steel consuming industry will be offended as much as other nations exporting these steel products. At times, such actions may not be politically viable too. The other options include arriving at some consensus with the concerned countries, i.e., the countries from which imports have exploded and try arriving at some unwritten voluntary restraints to support its domestic industry. There is already a good number of trade actions in force and a few investigations in progress. The US has also talked tough threatening strong actions against the so called unfairly traded stuff. But, they have also realised that it may not be easy for them to bring in trade cases even if they want. Therefore, the country has desired to talk. The administration apparently has written to a few countries, including India, on this subject.

Are these talks going to be all about voluntary (?) restraints in exports to the USA from these countries or will these look for a longer solution to the problems this industry is faced with?

Many would apprehend that a bilateral talk involving the US will most likely to fall in the first category. The truce may be pre-defined. Volumes to the US would be cut so that the industry in the country will be saved from competition helping it to make good profits. Does it make any sense now to talk about volume restraints when the prices have already reached the rock bottom in the US market? Apart from the fact that there are not too many buyers to cause a surge, the foreign steel makers will also perhaps think twice before selling at the ruling prices. In fact, much before the US administration could actually initiate talks, imports to the country in September have already fallen nearly 20 per cent. The drop will be sharper in the coming months. The US mills have also reduced production. Therefore, the supply of steel is fast adjusting to demand and in a couple of months will perhaps help the market comeback to some bit of stability.

Talks are of lesser value when the crisis has already taken place. These are needed to thwart any possible recurrence of crisis. The atmosphere for such talks will have to be different. Impulsive actions and high handedness are always counterproductive. Talks are needed to examine the future scenario and to share experiences. Talks are also needed to develop mutual trust and possible actions to regulate the flow of steel to a country that face the danger of coming to the brink of collapse. Talks are needed on a global basis-not merely between the USA on the one side and some steel exporting countries on the other. Even for itself, the USA could have opened the door for talks. What was it doing in March and April when there were sufficient indication of a sure surge in imports into the US and also a price collapse in the world market?

They could have explained the possible problem to the exporting countries. Steel companies in most of these countries were totally unaware that the prices in the US market were unreasonably high and could not foresee that soon the market would face a big glut, if imports continued at the same pace. Their individual actions were guided by pure price dynamics. There were no reasons for any company to step back in the interests of the firms in competition. Government intervention was required right there but not in the form of inviting trade cases.

Interestingly, it was the governments of a few other countries that showed more interest in talks than the US did. The steel market will perhaps take its own course whether there are talks or not in the coming months. But, talks are needed for the future. Steel does not have a special global forum to discuss and sort out issues. Let there be one.

(The author is Chief Economist, JPC and Convenor, Steel Exporters' Forum. Views expressed here are his own)