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Friday, 19 July, 2002, 16:27 GMT 17:27 UK
Europe delays steel retaliation
Steel plant
US steel mills have gained temporary protection
The European Commission has delayed escalating its trade war with the United States over steel.

The EU had been threatening to impose $380m (240m) worth of trade sanctions against US products on 1 August, including such items as orange juice, steel products and textiles.

Pascal Lamy
Pascal Lamy: EU may retaliate on steel

The sanctions would be in retaliation for the decision by the US to impose tariffs of up to 30% on a range of European and Asian steel imports in March.

But recent concessions by the United States - including exemptions of some 262 categories of steel imports, totalling some 700,000 tonnes - and the promise that more may be forthcoming, has led Europe hold fire.

On Wednesday the European Commission denounced the concessions made so far as "manifestly insufficient," but Washington said it would need until 31 August to sift through an additional 1,200 requests for product exemptions.

However, 14 new exemptions were announced on Friday just before the EU decision.

US Under Secretary of Commerce Grant Aldonas said he expected more concessions to be announced soon, while EU trade spokesman Anthony Gooch, said this was "a trade dispute, not a trade war."

Among EU member states, Germany and Sweden are known to be reluctant to push the steel dispute further towards confrontation with the US, and could have blocked the retaliation plan at Monday's foreign ministers' meeting with the backing of the Netherlands and the UK.

Steel deal

The US claims that the tariffs are necessary to protect its steel industry from unfair competition abroad, and restore its health after a string of bankruptcies.

EU sanctions list
Fruit juice
Rice
Apples and pears
T-shirts
Men's suits
Flat-rolled steel
Steel drums
Spectacles
Pinball machines

Steel production is concentrated in a few key Midwestern states that are crucial battlegrounds in the mid-term Congressional elections.

The EU claims that the US steel tariffs are illegal under World Trade Organisation (WTO) rules, and has complained to the WTO about the move.

It has been joined in the case by Japan and Brazil, who have also been hit by the tariffs.

A WTO ruling could take several years, but ultimately it could give the EU authority to impose countervailing tariffs of up to $2bn.

The US claims that imposing retaliatory tariffs before such a ruling would be illegal.

European industry hurt

The European steel industry says it is disappointed by the size of the American concessions so far.

It says the exclusions are only worth $200m, or 10% of volume of its business with the US.

"It is far from solving the problem that this issue has created for our companies," said Christian Mari of Eurofer, the EU steel industry group.

European manufacturers are also suffering from over-capacity and competition from cheap Far Eastern imports.

An international initiative to eliminate oversupply in the world steel industry would be a more effective means to improve the performance of the global steel sector, the EU has argued.

It has also warned that US consumers and steel users were being hit harder by the tariffs than anyone else.

Other disputes

The steel dispute is just the latest of a series of trade battles between the EU and the US.

The WTO has already ruled that US tax laws which exempt foreign profits from tax are illegal under world trade rules, and rejected one attempt by the US Congress to reform the laws.

And it has ruled that the EU's refusal to import American beef that has been treated with growth hormones is illegal under trade rules.

In addition to these trade disputes, the EU is worried that the US is backing away from commitments made at the Doha trade talks to open its agricultural markets to developing countries.

The EU is trying to reform its agricultural policy to reduce unfair competition with developing country products, and it was dismayed when the US voted to increase its farm subsidies substantially over the next five years.


World trade talks

Farming

Steel wars

Other disputes

Regional trade deals

Background

FORUM
See also:

31 May 02 | Business
02 May 02 | Business
03 Jun 02 | Business
20 Jun 02 | Business
10 Jun 02 | Business
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