RUSSIA'S TRADE NEGOTIATORS and steelmakers are preparing for a new round of talks with the United States on market access. But the steelmakers warn they are far from satisfied with the performance of Russia's minister of economic development and trade, German Gref, who last month played host to his U.S. counterpart, Commerce Secretary Donald Evans.

When asked if the United States is ready to recognize Russia as a country with a market economy, Evans tiptoed around the answer, much like his predecessors over the past three years. "We are considering whether or not the Russian economy can be deemed a market-based economy, and that's an answer we won't have for months," Evans told a press conference.

And since the U.S. Commerce Department classifies Russia as a non-market economy, investigation of dumping complaints uses surrogate country-cost data in estimating the gap between costs and Russian export prices. This exaggerates dumping claims, Russian steelmakers claim.

The Clinton administration was the first to promise Russia a reassessment of its economic status. The Canadian government also made the same pledge but, unlike Washington, Ottawa has already implemented it, recognizing Russia as a country with a market economy.

Gref told Evans that in return for lower trade barriers, Russia is willing to lower steel production and exports. But Russian steelmakers want to see the government take a tougher position in steel negotiations with the United States than it has done to date, said Vladimir Lisin, chairman of the board of Novolipetsk.

Goskomstat, Russia's official statistics agency, is reporting that the nation's steel mills cut output in the month of September, while the overall industrial production in Russia continues to grow. The total industry output was up 5.2 percent in the first nine months of the year compared to the same period last year. It rose by 3.8 percent in September, compared with September 2000. By contrast, the output of the ferrous-metals sector dropped 1.6 percent in September compared to the year-ago period. Output has fallen 0.1 percent for the nine-month period.

In rolled-steel production, Russian mills reported an increase of 0.6 percent in the first nine months, year on year. A total of 35.3 million metric tons of rolled products was put out by the end of September. Magnitogorsk remains the biggest producer with 6.9 million tons of rolled products, up 3.3 percent year on year. Severstal and Novolipetsk have reported cuts in production compared with last year. Severstal produced 6.03 million tons of rolled products, down 4.4 percent, while Novolipetsk produced 5.4 million tons, down 4.8 percent.

Yevgeny Manakin, acting head of the department for multilateral negotiations at Gref's ministry, said dates are now being considered with the U.S. Commerce Department for a new round of talks. The agenda will include Russian objections to the 1999 comprehensive steel-trade agreement, market status and the anti-dumping investigation now under way in the United States on cold-rolled steel, he said, adding that it is unlikely the United States will be ready to discuss the market-status issue during the upcoming consultations.

"We hope that consultations may take place in November. The U.S. side may have additional questions for us and the steelmakers that we will have to answer as part of the process for getting market status," he said.

According to Manakin, Russia will aim to avoid anti-dumping penalties on trade, and negotiate a multilateral trade-limits deal instead. "We think the situation in the steel industry is very serious. The best way to reach agreements is through discussions and multilateral agreements at the OECD meeting in December."

Evans told Gref the United States is concerned with Russian veterinary and other technical restrictions on U.S. food exports to Russia. These include a ban implemented on all meat imports from Florida since the onset of the U.S. anthrax scare and the restriction that U.S. poultry imports must land in Russian ports instead of the Baltic gateways.

"The Russian government may link the problem of veterinary restrictions on food imports from the United States to the problem of Russian access to the U.S. steel market and the issue of anti-dumping against cold-rolled coils. I cannot say to what extent Russia will insist on linking the two problems or whether it will link them at all, but [this possibility] is not excluded," Manakin said.

Manakin also said that Moscow has proposed a schedule of talks with the European Commission on steel-trade limits to replace the expiring European quota agreement. "We have proposed to have the first round of consultations before the end of October and the second round in November during the session of the trade and industry subcommittee of the Russian-EU committee," he said, "We hope the Europeans will agree to that."

For the past year Russian steelmakers have been saying they want to end the existing quota scheme and replace it with a system of voluntary output and export limits that would allow Russian products a percentage share of the European market. They are resisting the EU demands for an end to Moscow's export duty on scrap. The duty has raised European scrap prices, and lowered the cost of scrap supplies to Russian mills.

Alfa Bank's analysts estimate that U.S. support for Russian access to the WTO will produce benefits for steel exporters. Increased export volumes, the report claims, would add 7 percent to Severstal's export sales and $115 million to revenues. However, the report also warns that WTO accession would require Russia to lower import tariffs for automobiles. Since Severstal has become a shareholder in the Russian automotive sector, the tariff change is estimated to cost $53 million, leaving Severstal with a net gain from WTO membership of $62 million.

The study did not calculate the value of lower scrap prices in Severstal's financial balance that would be lost if the export duty were removed.