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Thursday, 7 March, 2002, 17:21 GMT
EU hits back against US steel duties
UK steel mill
The EU has begun the battle to protect European steel interests
The European Union has filed a formal complaint with the World Trade Organisation over the US decision to impose tariffs on imported steel.

Bananas was peanuts compared to steel

Willy Helin
EU spokesman
The EU move sets the ball rolling on a process which, while likely to be lengthy, could result in sanctions against the US.

Japan has already posted a complaint while Australia and New Zealand are filing a joint submission.

Several other countries, including Malaysia, South Korea and Brazil, are thought likely to follow suit.

Both Taiwan and China, each a recent entrant to the WTO but very rarely found on the same side of any argument, could also join in.

War of words

European Trade Commissioner Pascal Lamy said on Wednesday that the US move, designed to protect the underperforming US steel industry from foreign competition, was "political, not economic."

The WTO should intervene as soon as possible so things will not get out of hand.

Supachai Panitchpakdi
WTO director-general designate

The EU's 15 member states contribute 20% of the 27.35 million tonnes the US imported last year, and Mr Lamy said he would seek compensation equal to the damage caused.

The US has insisted its measures - which impose tariffs of 8-30% on imports from a number of countries for three years from 20 March - are legal under WTO rules, simply constituting a breathing space to allow American steelmakers to restructure.

Those who will suffer most are American consumers

Wim Duisenberg, ECB president

More than 30 US steel firms have gone bankrupt in the past four years, a situation US President George W Bush has blamed on competition from foreign steelmakers supported, over half a century, by government subsidies.

The European Central Bank president Wim Duisenberg also entered the debate on Thursday, describing the decision as "deplorable" and warning that the US public would lose out.

"Those who will suffer most are the American consumers who will have to pay more than they otherwise would have to do for certain products," he said.

Even the US Federal Reserve chairman Alan Greenspan said he did not agree with the move.

"I happen not to agree with the particular judgement, but I recognize it's a very very tough judgement to make," he said.

'Global solution'

In the face of what could brew up into a global trade war, incoming WTO director general Supachai Panitchpakdi pledged rapid action.

"We should seek a global solution to this," said Mr Panitchpakdi, a Thai national who takes over from New Zealand's Mike Moore in September.

"The WTO should intervene as soon as possible so that things will not get out of hand, because you can get retaliation after retaliation.

"Then everybody will lose out."

He advocated direct intervention by the director general's office, warning that the US action threatened to derail a new round of trade talks launched at long last amid much relief at Doha last November.

Request to US

Direct action might avoid the need for individual countries to pursue complaints at the WTO.

But in the meantime, the first step, which the EU has now activated, is a request for consultations at the WTO with US representatives.

EU Trade Commissioner Pascal Lamy
Mr Lamy: No economic basis for the US decision
The consultations are set to lead to the formation of an expert group which will rule within 12-18 months on whether the US tariffs are permitted under WTO rules governing "safeguard measures".

Direct discussions are already under way as part of a different procedure which could produce compensation within three months for damage which Mr Lamy estimated at $3.8bn.

Either the US could reduce tariffs on other items to match the cost to EU member states, or it could simply pay an agreed sum.

Long list

The current row is only the latest in a sequence of transatlantic trade tussles.

For years the two locked horns over preferential tariffs on bananas from former French and UK colonies in the Caribbean, after US banana exporters' campaign contributions to the Clinton White House persuaded the administration to push the issue.

The US repeatedly won that one, and the Bush administration finally managed to conclude a deal acceptable to both sides - although the small Caribbean banana producers felt they had been squeezed out by big US players.

But a row over growth hormones in beef, which Brussels says it should be allowed to ban on health grounds, rumbles on.

And the US is still refusing to modify a $4bn preferential tax regime which, on EU prompting, the WTO has declared illegal.

Steel, though, could dwarf these, the EU says.

"Bananas was peanuts compared to steel," EU Washington spokesman Willy Helin told AFX News.

The BBC's Nick Childs
"There are fears the controversy could have wider diplomatic implications"
Mike Moore, Director, World Trade Organisation
"These are challenges, not difficulties"
See also:

06 Mar 02 | UK Politics
Blair says US steel move 'wrong'
30 Jan 01 | Business
Corus Group: a profile
01 Mar 02 | Business
US steel workers stage mass protest
07 Jun 01 | Business
Slowdown fuels US steel aid
26 Nov 00 | Business
US faces $4bn trade threat
27 Jan 02 | Business
Gary's steel town blues
06 Mar 02 | Business
South Africa cheers US steel tariffs
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