US Unlikely To Compensate Over Steel Tariffs, Warn Analysts

by Ulrika Lomas, Tax-News.com, Brussels

26 April 2002

The Institute for International Economics predicted earlier this week that the United States is unlikely to compensate any of its trading partners for losses experienced as a result of recent 30% import tariffs imposed on imported steel.

China, Japan, Korea, and the European Union have all protested at Bush administration moves to protect the ailing US steel industry, arguing that they are 'protectionist' in nature. The European Union and Japan are currently readying to impose retaliatory sanctions, China has asked for an exemption from the tax, or compensation for lost revenue, and the World Trade Organisation is preparing to rule on the issue.

However, Gary Hufbauer, a trade policy expert for the Institute, explained this week that even if it were so inclined, it would be exceptionally difficult for the US government to compensate by reducing import tariffs on other products, due to domestic political pressures.

'The problem is that compensation that would be commercially interesting to other countries would probably be very painful over here,' he explained to the Reuters news service.

Indeed, it is unlikely that any other US industry sector would willingly swallow tariff reductions on imports in their own sector in order to aid the steel manufacturing industry.

However, the European Union's threat to impose sanctions worth around $335 million on US citrus, clothing, and steel products, if the US does not provide compensation by June 18 could prove equally, if not more, painful for the manufacturing community.

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