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Wednesday, 22 May, 2002, 16:44 GMT 17:44 UK
US blocks Europe's WTO steel bid
Steel plant
Steel tariffs could still trigger all-out trade war
The US has vetoed a request from Europe for the World Trade Organisation (WTO) to rule on the tariffs Washington slapped on steel imports earlier this year.

However, the move is unlikely to block a study by the WTO into the tariffs in the long-run.


The target (of 2004 for completing trade talks) was already highly optimistic... Now I don't see that it has a snowball's chance in hell of being met

Trade negotiator
Any country on the receiving end of such a complaint can veto one request to the WTO's dispute settlement body (DSB).

But it can only do so once, and the European Union is likely to repeat its demand - along with Japan - when the body meets on 3 June.

Lengthy process

What the US veto does in practice is prevent the DSB from setting up a three-person panel, the first step in any trade dispute.

Given the determination of those countries opposed to the US tariffs, the panel is almost certain to be set up.

It will probably start work in August, according to the Japanese, and initial deliberations will take about six months.

But even if the panel rules against the US, the appeals process could take till early 2004 to reach a conclusion.

Striking back

Well before then, however, the US could be hit with retaliatory tariffs on the part of Europe and Japan, which are scheduled to take effect from 18 June onwards.

A cornfields in Kansas in a thunderstorm
A storm is brewing over US farm subsidies
Both are waiting for a WTO ruling on whether these are permitted.

Other complainants are holding off until 2005, by which time the main WTO case should have been settled.

The growing tension risks sparking a full-scale trade war, and is already spilling out beyond relations between the US and its partners.

China has now imposed its own tariffs to stop it being swamped by cheap imports looking for a new market now that the US is closed for business.

That has triggered a move by South Korea to work with Japan to get China to change its mind.

Up in arms

The resurgent protectionist mood in the US is reflected in other ways, too.

Last week, Congress refused to give President George W Bush the right to have trade agreements he has signed approved on a straight yes-no basis.

Instead of passing a bill to allow so-called "Fast Track" approval, Congress added an amendment banning any relaxation of anti-dumping rules - a move the White House had made clear would produce a presidential veto.

Doha in doubt

In addition to steel tariffs, the US has also annoyed its trading partners by introducing billions of dollars of new farm subsidies.

The increasing tension is seen as jeopardising the chances of success of the latest set of world trade talks, which began in Doha last November.

Developing countries had been promised that Doha would prioritise areas, such as farm subsidies, which are key to their economies.

Now any notion of completing the round by 2004 looks highly unlikely.

"The target was already highly optimistic," said one senior negotiator in Geneva, where the WTO is based.

"Now I don't see that it has a snowball's chance in hell of being met."

 WATCH/LISTEN
 ON THIS STORY
Peter Fish, MEPS Consultants
"China is trying to send a message to America, but also to the Japanese."

World trade talks

Farming

Steel wars

Other disputes

Regional trade deals

Background

FORUM
See also:

21 May 02 | Business
16 May 02 | Business
15 May 02 | Business
14 May 02 | Business
10 May 02 | Business
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