Trade War Feared as WTO Rules Against US Steel Tariffs

ANDREW OSBORN & LARRY ELLIOT / Guardian Weekly 17jul03

The European Union and the United States are teetering on the brink of a transatlantic trade war after Brussels threatened a $2.2bn package of sanctions unless Washington scrapped steel tariffs ruled illegal by the World Trade Organisation last week.A WTO disputes panel said US import tariffs of up to 30% on foreign steel could not be justified under global trade rules and that they should be abandoned as soon as possible.

Brussels claimed victory in its fight to force President George Bush to drop measures aimed at shoring up his political support in America's industrial heartlands, but the US said it would appeal against the decision. The world's two biggest trading blocks are already at loggerheads over Europe's anti-GM foods regime and US tax breaks for multinationals.

The latest WTO ruling comes as EU and US negotiators are trying to settle their differences in the global trade liberalisation talks.

Within minutes of last week's ruling, the European Commission said it would seek to hit pre-selected US products with retaliatory tariffs worth up to $2.2bn a year unless Washington dismantled its offending steel tariffs within five days. "If and when the US does not comply with this ruling, the EU will impose countermeasures," said Arancha Gonzalez, a spokeswoman for the EU trade commissioner, Pascal Lamy. She said the sanctions, if used, would hit US steel products, textiles and fruit and vegetables.

"We would like to urge the United States to look at the wider picture - all the world's steel exporters are telling them to remove these tariffs. This is not just a partial victory - it is a full victory. The US has been caught red-handed." The WTO appeared to side with the EU and fellow complainants on every front. The trade watchdog said the US tariffs, announced by Mr Bush last March, were in breach of global trade rules in every category.

The US had argued they were necessary to help America's steel industry recover from a wave of cheap Asian and European imports, but the WTO said it had found little evidence to show foreign imports had dramatic-ally increased.

The Guardian Weekly 20-3-0717, page 12