EU to take tariff dispute to WTO, may retaliate

British leader calls Bush action on steel `unacceptable'

March 07, 2002|By Bill Glauber | Bill Glauber,SUN FOREIGN STAFF

LONDON - Europe girded for a trade battle yesterday after the Bush administration's decision to impose tariffs on steel imports.

While temporary tariffs of up to 30 percent may play well in American Rust Belt mills, they're furiously opposed by the 15-member European Union, which vowed yesterday to protect its steel industry and bring the dispute to the World Trade Organization.

Criticism of the tariffs was also echoed in large steel-making countries such as China, South Korea, Japan and Russia.

The tariffs could hit Western European steel makers and their workers where it hurts most - on their bottom lines and in their paychecks - with fears that cheap steel blocked from the United States might flood the European market, depressing prices and leading to the loss of thousands of jobs.

In Britain, which has seen its own steel industry painfully retooled over the decades, Prime Minister Tony Blair described the tariffs as "unacceptable and wrong."

During a tense prime minister's question time in the House of Commons in which criticism of the U.S. move cut across party lines, Blair added: "The problems of the American steel industry are best solved by restructuring that industry, not by imposing arbitrary and unjustified tariffs."

Hywel Francis, a Labor Party member of Parliament whose Welsh district includes a major steel facility, said "there is a danger of a trans-Atlantic trade war."

Francis said Britain has been lobbying the U.S. government not to institute the measures, which he blamed on the Bush administration's catering to domestic politics.

"We were hoping this wouldn't happen," he said.

In Brussels, Belgium, the European Union Trade Commissioner Pascal Lamy said "the steel market worldwide is not the Wild West where everybody just does what they like. There are disciplinary rules."

The EU began planning a long-term strategy of taking its case before the WTO, which would rule on the legality of the tariffs, in a process that could take months if not years. The EU also prepared for the short-term, too, what Lamy called a "safeguard action." One option at its disposal could be retaliatory tariffs.

"We have to exercise our right to protect our industry and our jobs," Lamy said.

There are nearly 300,000 workers in the EU steel industry, with about 85,000 in Germany, 37,000 in France and 26,500 in Britain. European officials claim the tariffs threaten 4 million tons of steel exports to the U.S. market.

Anthony Gooch, an EU trade spokesman, said Europe is not attempting to get into a "tit-for-tat" trade dispute with the United States.

"What we've produced is that we will take the U.S. to the WTO and hope others will join us," he said.

"We have put everything in place to activate safeguard measures of our own. They have closed their steel market significantly. Our measures would be in response to what they have done."

Gooch said the EU will attempt "to maintain the level of our imports as they currently stand, not to close our market but to maintain its level. We can't take on board the excess the Americans are shoving on the world steel market. Our lean, mean and competitive producers will go out of business."

In Moscow, Russia's foreign ministry called in U.S. Ambassador Alexander Vershbow to discuss the matter.

Europeans and Americans have gained much practice in recent years in trade disputes over everything from bananas to cashmere.

According to Iain McLean, an Oxford University political scientist who has written extensively on trade policy, in this case, the U.S. stance is "wrong" but the EU is not entirely without blame.

"Individually, European Union countries have been no better than the U.S. in protecting uncompetitive steel industries," he said.

McLean said there is little doubt over the dispute's outcome.

"When it goes to the WTO the U.S. will lose and policy-makers must know this," he said.

"What is going on in U.S. domestic politics is that they are winning favor for domestic lobbies for a cause which politicians deep down must know they will lose in the end. And when they do lose, they'll blame it on foreigners."

The Associated Press contributed to this article.

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