EU Readies List Of Targets For Sanctions Against US

by Ulrika Lomas, Tax-News.com, Brussels

25 March 2002

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, and on Friday senior EU trade representatives met 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.

The European Commission confirmed that the list of products targeted for potential sanctions included steel, textiles and citrus fruits. The Commission said it had drawn up its list with a view to putting maximum pressure on the US to withdraw its measures, while doing the minimum harm to European businesses.

A spokesman declined to confirm reports that the products on the list were targetted at parts of the US where Republicans are vulnerable in congressional elections later this year, but said: "You do these things in areas where you want to build coalitions and bring the maximum pressure to bear on people to come into line with World Trade Organisation rules."

"The rationale for targeting steel is obvious. This is a dispute about steel. We also don't want to have a detrimental effect on the EU economy - that would be shooting ourselves in the foot."

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.

Under WTO rules, the EU would have to notify its list of US products targeted for potential retaliatory action by May 20. It would then have the right to impose sanctions once a WTO dispute settlement panel had ruled in its favour. But it is also considering the possibility of more immediate retaliation if the US turns down its request early next month to grant immediate compensation for lost EU steel exports to the US.

"At this stage, we haven't set out clearly which option we'd choose. It's a political decision at the end of the day, which would be up to Commissioner Lamy in consultation with the member states," the spokesman said.

The EU has stressed throughout the dispute that it wants to follow WTO rules to the letter, and is confident that it will win a dispute settlement panel.

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