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Last Updated: Monday, 10 November, 2003, 22:29 GMT
EU scores steel victory over US
Steel piping
Steel tariffs have raised costs for US industry
The World Trade Organisation (WTO) has confirmed that US tariffs on steel imports are illegal.

The WTO's announcement is a victory for the European Union (EU), and puts fresh pressure on Washington to withdraw import duties on steel.

The WTO appellate body upheld the decision of a panel of trade judges that the tariffs were not consistent with international trade rules.

The US said it "disagrees" with the ruling and would review the decision.

"We disagree with the overall WTO report - we are going to study it, look at its implications and go from there," White House spokesman Scott McClellan said while travelling with President George W Bush on a trip to Little Rock, Arkansas.

The World Trade Organisation had said the US measures were "inconsistent" with free trade agreements.

We hope that President Bush will act quickly to remove the... restrictions, so that we can get on with supplying our US customers on a fair and equitable basis
Spokesman for Anglo-Dutch steelmaker Corus

It said: "The appellate body recommends ... the United States to bring its safeguard measures, ... into conformity with its obligations under WTO rules", the 186-page ruling said.

The EU, whose steel industry has undergone a painful reorganisation, had joined forces with Brazil, Japan, and other exporters to complain to the WTO about the US tariffs, imposed 21 months ago.

Speaking on the BBC's Newsnight programme, British Trade Minister Mike O'Brien, said: "We hope the Americans will lift these tariffs, which the WTO have said are unlawful.

"If not then we (the European Union) will have to impose retaliatory measures. I hope the Americans will now comply with the WTO ruling."

The European Commission has drawn up a hit list of US imports worth about $2.2bn a year - including Harley Davidson motorcycles, citrus fruits and textiles - which will be targeted with retaliatory sanctions.

'Re-balancing measures'

The hit list is said to have been calculated to inflict maximum pain on states whose support will be crucial to President George W Bush's re-election campaign next year.

EU Trade Commissioner Pascal Lamy has said the retaliatory import tariffs could be in place as soon as early December if the US does not now back down.

After the decision an EU statement said: "It should be noted that members affected by the US measures will be entitled to apply re-balancing measures and take any other appropriate action in accordance with WTO rules."

And Arancha Gonzalez, EU trade spokeman, said: "There are rules and we all need to respect the rules."

EU sanctions threat to US

Duties worth $2.2bn (1.31bn)
100% duties on some products
Harley Davidson motor bikes targeted
Also citrus fruits and textiles
Swing states in US elections affected
Retaliation to start in December

The row traces its origins back to January 2002, when the Bush administration imposed tariffs of up to 30% on steel imports in an effort to protect US producers from tough foreign competition.

The US said the tariffs were a temporary measure designed to give its beleaguered steel industry a chance to restructure, and were therefore consistent with WTO rules.

Following the WTO decision a spokesman for Anglo-Dutch steel firm Corus said: "We welcome today's decision by the WTO Appelate Body against the US Section 201 measures.

"We hope, in light of this decision, that President Bush will act quickly to remove the 201 restrictions, so that we can get on with supplying our US customers on a fair and equitable basis."

He said exports to the US had generally held up in 2001 and 2002, but would be down in 2003.

Profits depressed

Following Monday's WTO announcement the US Trade Representative's office said the tariffs, "were intended to provide the domestic industry with the breathing space needed to restructure and consolidate".

The US's move had provoked howls of protest from steel exporting nations worldwide, who complained to the WTO.

The trade watchdog delivered an initial ruling in the EU's favour in July this year, and the appellate body has upheld that decision.

The US government is considering whether to extend its steel import tariffs to March 2005, after coming under heavy pressure to do so from steel producing states.

But the tariffs have also been heavily criticised by US manufacturers, who complain that their effect has been to push up steel prices, depressing profit margins and causing job losses.

The BBC's Evan Davis
"If America doesn't remove its steel tariffs Europe can now tax some American imports"

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