Trade chief vows stainless response to US steel tariffs

Date: 07/03/02

By Peter Chapman

EUROPE has vowed to keep the moral high ground in its response to President George W. Bush's decision to impose three years of punitive tariffs of up to 30 on US steel imports - despite universal anger over the move.

Commission Trade chief Pascal Lamy said the EU would play by the rules in response to what he called a 'purely political' step by Bush to curry favour with steelworkers in upcoming elections. Lamy is so far refusing temptations to go for 'tit for tat' retaliation.

'It is not a question of you kick me in the shins and I punch you in the nose,' he said, although he added: 'It is a natural reflex we have. We have all been kids in the park. But it is important to remain calm and keep and even keel...The main question we have to ask is do we play by the rules. Our view is that we should.'

Lamy played down claims that the US action - which will put the harshest duties on high-end products that Europe specialises in - would strain his much-ballyhooed relationship with good friend Robert Zoellick, Washington's chief trade negotiator.

Instead he put the blame fully on the shoulders of Bush, whom he said made 'certain undertakings during his presidential campaign' and has 'now taken a decision'. Lamy said the first steps would be a formal complaint to the World Trade Organisation and an examination of what safeguard actions the EU could take to prevent up to 16 million tonnes of steel destined for the US from other countries being diverted to the Union.

A spokesman for Europe's biggest steelmaker Arcelor said this was the most pressing danger for the European industry: producers in eastern Europe, China and Korea all looking for new, non-US markets.

Lamy said safeguards to limit extra imports from these countries could be put in place quickly, but he insisted they would be fully in line with the WTO's rulebook.

The Union will also seek compensation from the US for damages its actions will cause European producers. Bush was widely condemned by EU leaders, including Germany's Gerhard Schröder, France's Jacques Chirac and the UK's Tony Blair.

Blair, a staunch Bush ally since 11 September, described the decision as 'unacceptable and wrong'. Industry analysts said the biggest impact of this week's decision would be the harm that it could cause the global trading system if other countries choose to follow the US example.

Andrew Spencer, a fund manager for J.P. Morgan Asset Management, said the markets would shrug off the Bush tariffs if they are isolated to steel. But he said the danger is that the US could encourage other countries to take similar measures to protect their own domestic industries.

'And what could the Americans say about that? Answer: absolutely nothing,' said Spencer.

US Trade Representative officials last night rejected Lamy's allegations that the decision was taken on purely political grounds to protect an industry that can't compete on world markets after failing to restructure during the 1970s and 80s.

'They have to have their hour of rhetorical response,' said one senior official. 'But we are doing what is within our rights. It is not an easy thing to do, and we don't do it lightly. This has been the largest examination of a safeguard action ever taken in the US.'

Europe has vowed to keep the moral high ground in its response to President George W. Bush's decision to impose three years of punitive tariffs of up to 30% on US steel imports, despite universal anger over the move.