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Friday, 31 May, 2002, 16:43 GMT 17:43 UK
US lodges tit-for-tat steel complaint
Workers assembling the steel frame of a new mass transit terminal
Steel's global commodity status has led to oversupply
A trade war over steel crept a step closer on Friday after the US hinted it could file a formal complaint against Europe.

The US is itself under fire for having slapped tariffs of up to 30% on most imported steel for the next three years.

In retaliation, the European Union has - as well as lodging its own complaint with the World Trade Organisation (WTO) - drawn up its own steel restrictions.

It has said that it aims to prevent cheap steel diverted from the US flooding the European market.

But now the WTO has confirmed it has received a "request for consultations" from the US over Europe's decision - often the first step in a formal challenge.

Retaliation

The 15 EU countries have also voted to attach tariffs to a range of non-steel US goods in punishment.

On Friday, Brussels offered to delay the scheduled start date on 18 June for its non-steel tariffs - as long as a deal in the interim exempted many EU steel products from the US tariffs.

The EU is also looking for a reduction in other duties as compensation.

"Member states fully support us in seeking a satisfactory offer of compensation and product exclusions which they expect the US to put forward," said EC spokesman Anthony Gooch.

That, he said in a statement, would make Europe's countermeasures unnecessary.

Tit for tat

Under WTO rules, the EU has 10 days to respond, followed by another deadline a month further away for consultations to take place.

If there is no result, the next step is a full dispute resolution panel.

That process - in parallel to the process already activated by the EU - could take as much as two years.

Washington DC's position is that its own tariffs are entirely legitimate - and that therefore it is Europe that is breaching the rules by retaliating.

Protectionism

Europe, on the other hand - along with almost every other major steel-producing country included in the US tariffs - sees things very differently.

While WTO rules do allow a country to "safeguard" an industry in need of restructuring, the US situation does not fit the definition, the complaints say.

Steel imports have not risen, Europe points out, negating one key part of the safeguard's definition.

Instead, the EU complaint says, the US is punishing the rest of the world for its steel producers' failure to stay competitive in a global market - and is fortifying its borders to defend them.

China, Japan and South Korea have yet to lodge formal complaints, but the WTO believes they will follow Europe's lead within days.

Observers including the International Monetary Fund have pointed to the potential for hypocrisy in the US moves.

Anne Krueger, the IMF's deputy managing director, said it was "not totally in accord with international trading rules that the US has signed up to".

Anger toward the US has been intensified by a decision to pile new subsidies onto agriculture, a key area of concern for developing countries.


World trade talks

Farming

Steel wars

Other disputes

Regional trade deals

Background

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See also:

22 May 02 | Business
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