Trade war looms over steel dispute

US steel workers have lobbied vociferously

The European Union has vowed to protect its own steel industry in the wake of the US decision to slap punishing penalties on imported steel.

Steel jobs

US: 175,000 employees
20,000 jobs lost in past four years

UK: 26,500 employees
10,000 jobs lost in past 4 years

Germany: 85,200 employees
7,900 jobs lost in past 4 years

EU: 299,600 employees
22,200 jobs lost in past 4 years

The EU said the decision flouted international trade rules, and promised to launch an immediate complaint with the World Trade Organisation.

EU Trade Minister Pascal Lamy said the US decision would hurt the EU in an "unjustified and unfounded way".

"We will do everything we possibly can to protect our own industry and our own jobs," Mr Lamy said.

President George W Bush's decision is in response to pressure from the US steel industry, which is struggling to compete with cheaper products from abroad.

Tony Blair has written to Mr Bush and spoken to him on the phone

Mr Bush defended the move, saying it would allow US industry to compete on a "level playing field" and recover from the damage he said had been caused by "50 years of foreign government intervention in the global steel market".

While the move may safeguard thousands of jobs within the US steel industry, it will put pressure on non-US firms to make further cutbacks.

US steel imports were worth about $8.6bn last year, making up 10% of world trade in steel.

The EU is afraid of a flood of surplus steel imports from countries such as Japan which will no longer be able to compete in the US.

Retaliation

A host of other countries have expressing their worries over the US decision, including Japan, Brazil, Australia and South Korea.

Downing Street said that UK Prime Minister Blair had written to Mr Bush to warn him that tariffs would be bad not only for the world economy, but also for American consumers, who would be forced to pay more for steel products.

The US ambassador in Moscow was summoned to the Russian Foreign Ministry to be told that relations could be damaged if the tariffs were imposed.

Countries affected

Brazil, Ukraine, South Korea, Japan, Russia, Germany, Turkey, France, China, Australia, Netherlands

Russian Prime Minister Mikhail Kasyanov said the decision would have a "negative impact on Russia's steel industry", but said the move would not spark a trade war.

A senior Brazilian trade negotiator, Jose Alfredo Graca Lima, also criticised the move.

"We have been an indiscriminate and unfair victim of the United States," he said.

And Japanese Trade Minister Takeo Hiranuma said they regretted that the decision had been made "without listening to the voices of its trade partners."

Short term measures?

The duties, ranging from 8% to 30%, will take effect on 20 March and affect 10 separate steel products.

It can be amended by the White House if the steel industry's financial crisis worsens or improves.

This relief will help steelworkers, communities that depend upon steel, and the steel industry adjust without harming our economy

George W Bush

Mr Bush urged US steel companies to take advantage of the "temporary safeguards" and restructure their industry.

The decision was described by advisers and lawmakers as a compromise approach, designed to protect US industry while minimising criticism from abroad, and from American manufacturers that rely on cheap steel.

Several trading partners, including Canada and Mexico, are exempted.

Job losses

Thousands of US workers have lost their jobs as a result of numerous US steel firms going bust over the last few years.

President Bush: Compromised between two industries

They argue that, without the protectionist measures, the whole US steel industry could become obsolete.

But European steel-makers, including Britain's Corus, fear that US tariffs could limit access for their product in the lucrative American market as well as diverting exports from other countries to Europe, harming local industry.

Details of the tariffs:

• Tin mill steel, 30%
• Flat steel products including cold-rolled, plate-rolled and coated sheet steel, 30%
• Hot-rolled bar and cold-finished bar, 30%
• Carbon and alloy fitting and flanges, used in car production, 13%
• Stainless rod, 15%
• Rebar (product used largely in construction) 15%
• Slab steel, 30%, but only after the first 5.4 million tons are imported