EU Commission Prepares Riposte To US Steel Levy

by Ulrika Lomas, Tax-News.com, Brussels

18 March 2002

The governments of the 15 EU member states have given unanimous backing to the European Commission's plan to target US steel and textile exports in retaliation for Washington's imposition of tariffs of up to 30% on steel imports.

The Commission confirmed on Friday that it was drawing up a list of US goods worth about $2bn which could face increased EU tariffs. The $2bn relates to the value of EU steel exports affected by the US tariffs. The EC has begun consulting with the World Trade Organisation, "which is likely to lead to a dispute settlement panel pronouncing on the US measures". It has also requested compensation for the loss of EU steel exports and is preparing safeguards against cheap steel diverted from the US flooding the European market.

"The overall amount we'll be looking for is close to $2bn," said an EU official said on Friday. "This would include US steel exports worth around $600m. Textiles would be another area likely to be on the list."

The Commission said a list of products for potential sanctions would be drawn up and submitted by May 20, the deadline under WTO rules. "That is not to jump to the conclusion that we will necessarily will go down that route, but we have to protect our rights," said Anthony Gooch, spokesman for Pascal Lamy, the EU trade commissioner.

Opinion in the US about the import levies is by no means unanimous.

The New York Times says that Treasury Secretary Paul O'Neill told a foreign policy group last week that he disagrees with the Bush administration's recent decision to place tariffs on imported steel. In off-the-record comments after a dinner speech at the Council on Foreign Relations in New York on Wednesday, O'Neill said imposing tariffs jeopardizes US interests as the world's leader in promoting free trade and would cost more jobs in the US than it would save, people who attended the speech were cited as telling the daily.

The Washington Post is critical of tariffs but believes Europe and Japan are largely to blame for being "overdependent on America" and for allowing their economies to stagnate. "Consider the arithmetic," writes Robert J Samuelson. "When introduced in 1999, the euro was worth $1.17. That meant that a European steel company with 100 euros of costs would have to charge $117 to cover its costs. But since then, the euro has depreciated by about 25%. It's only worth 88 cents. The same company, to cover its 100 euros of costs, now needs to charge only $88. American farmers and manufacturers have suffered a huge competitive blow."

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