EU Decides To Levy Tariffs On Steel Imports

by Ulrika Lomas, Tax-News.com, Brussels

26 March 2002

After senior EU trade representatives met on Friday to discuss a draft list of US exports worth about E2.5bn ($2.2bn) against which the EU could retaliate if it failed to gain compensation for trade lost as a result of the tariffs, which came into effect on March 20th, it was announced yesterday that the EU will early next week bring in tariffs of between 15% and 26% on steel imports, to protect European markets against an expected surge in trade in the wake of the US introduction of punitive steel duties.

The tariffs will cover 15 categories of steel, accounting for about 40 per cent of EU steel imports, officials said on Monday. Under the draft proposal, tariffs would be introduced on imports above a certain quota. The scheme would last an initial 200 days. Officials said the quotas and tariffs would cover imports of around 5.7m tonnes of steel over the initial six-month period of their operation.

Representatives from the 15 European Union member states and the Bush administration met unsuccessfully last week in an attempt to come to agreement over the trade dispute currently brewing between the two blocs over US steel tariffs.

President George Bush imposed the taxes with the rationale that they would allow the US's ailing steel industry, which has suffered a rash of bankruptcies since the mid-1990's, to get back on its feet. However, critics of the tariffs, which include the EU, Japan, South Korea, Australia, and New Zealand, have argued that there has been no sudden rush of imported steel to the United States, and that therefore the President's actions are illegal under World Trade Organisation rules.

The measures announced yesterday are designed to defend the European market against an increase in imports. Quotas would be filled on a first-come, first-served basis. However, developing countries would be excluded from some measures under rules allowing the exemption of countries which account for less than 3% of a country's imports.

The EU normally expects to import around 27m tonnes of steel per year, but thinks that could increase by as much as 15m tonnes following the partial closure of the US market. Officials stressed that the idea was to maintain imports at around current levels. The quotas were set by taking the average of 1999-2001 imports and adding 10%.

The safeguard measures will probably be adopted by the European Commission on Wednesday, allowing them to come into force shortly after the Easter holiday period, probably around April 3.

"In doing what it did, the US knew it would have a domino effect," said Anthony Gooch, spokesman for Pascal Lamy, EU trade commissioner. "We have not taken the opportunity to indulge in protectionism ourselves. Our measures are strictly confined to products where the US action will result in trade diversion."

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