US Under Attack On Steel Tariffs

by Ulrika Lomas, Tax-News.com, Brussels

17 April 2002

Pressure is mounting in Europe for action to be taken against the US after it imposed tariffs on steel imports.

At the end of last week, joint dispute settlement consultations took place in Geneva, between the EU, Japan, Korea, China, Switzerland and Norway on one side and the US on the other side which delivered a very clear signal of the strong concern about the US protectionist measures among all the players on the global steel market. This Friday, EU trade officials will discuss proposals for taking limited retaliation against the US as early as June 18 if Washington rejects demands for compensation for lost steel trade.

The nations arrayed against the US are saying that the tariffs are not just illegitimate under trade rules, but break the basic safeguards all members of the WTO have agreed to, permitting early action in retaliation.

Pascal Lamy, EU trade commissioner, said yesterday in an interview: "There is no way it cannot be seen in Europe as 'you can go to hell'." Mr Lamy said that although he personally doesn't want to tie the steel dispute to the long-running Foreign Sales Corporation saga, under which the EU will probably be able to target US$4bn of trade with punitive tariffs, there was increasing willingness to do so among his colleagues. "Obviously, I am swimming against the current on this one," said the Commissioner.

Mr Lamy said early retaliation risked escalating the conflict. "But if we have the right to retaliate, which I believe we have, not doing it would mean shrinking our constituency in Europe that free trade is good for everybody, provided it's within the rules. Jettisoning the rules is a big problem because the next time I say we have to abide by the rules, people in Europe will say others don't abide by the rules, so why should we make concessions?"

He said that it was unclear whether the Commission had legal authority to impose sanctions on US exports without member states' approval, or indeed whether early retaliation was allowed under WTO rules. He expected decisions to be reached on these points after discussions with the EU council of ministers and the European parliament.

EU leaders are meeting President George W. Bush in Washington on May 2, but Mr Lamy wasn't hopeful that the President would withdraw the steel tariffs.

However, the US administration is considering pleas for exclusion from the tariffs from a number of applicant nations, and has already agreed some exclusions, which may go some way towards mollifying its opponents. This administrative process allows free trade doves in the administration to moderate the original protectionist announcement without re-opening the lobbying process which led to the tariffs in the first place.

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