Washington may retaliate against EU sanctions on US exports

Washington has warned that it may retaliate if the EU imposes its planned trade sanctions against US exports, in order to pressure the US into withdrawing their steel tariffs against EU producers.

The emerging trade dispute will be discussed at the EU-US Summit, hosted by the US President, George Bush, in Washington on 2 May.

Speaking before the Summit, a senior US trade official warned the EU and Japan that applying unilateral retaliatory measures would violate international trade rules if they take effect before the WTO dispute settlement body rules on whether the US safeguard measures for steel are illegal. He warned that the US could also use the option of retaliation if the EU decides to do so without waiting for the WTO ruling.

 

The USclaims that the EU is breaching WTO rules by seeking to impose unilateral retaliation measures before a WTO panel has ruled on the US tariffs. This is not expected to happen until next year.

European engineering companies have written to Trade Commissioner Lamy, urging the EU not to introduce import restrictions on steel as part of the trade conflict with the US. The industry associationOrgalimestates that trade restrictions would lead to large economic losses for European companies.

 

The world steel market faces significant overcapacity and the US has been slow to introduce the necessary restructuring measures. More than 30 US steel producers have gone bankrupt over the last four years.

The US International Trade Commission (ITC) ruled at the end of 2001 that foreign producers have been flooding the US market with cheap imports, and recommended that the US administration should introduce import tariffs for steel. On 5 March, President George Bush announced the imposition of tariffs of between 8 percent and 30 percent on a range of products from Europe, Asia and Latin America.

On 19 April, the Commission revealed its planned retaliatory measures against the US, worth 300 million dollars, and designed to put pressure on the US to withdraw its steel tariffs against EU producers. The retaliation measures would target sensitive export products such as fruits, textiles and steel. They are expected to commence on 18 June.

 

The EU must notify its retaliatory measures to the World Trade Organisation (WTO) by 17 May 2002. The EU intends to apply the sanctions as from 18 June.

The WTO ruling is expected within a year.

 

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