The European Union has warned the United States that it will retaliate if Washington goes ahead with plans to impose tariffs of up to 30 percent on some steel imports. A March 4 letter from European Commission president Romano Prodi to President Bush says such tariffs might trigger a transatlantic trade war.
EU officials say Mr. Prodi's letter made clear that he sympathizes with the difficulties of the US steel industry but that tariffs are not the way to help it solve its problems.
The officials say the EU could respond to a tariff hike by complaining to the World Trade Organization and by taking measures to protect its own market against steel imports from the United States. Germany and Sweden have already urged the EU to take up the matter with the WTO.
The WTO recently ruled in the EU's favor in a dispute over U.S. export subsidies in which Brussels has sought the right to impose up to $4 billion in trade sanctions against Washington. So far, the EU has taken no action on the matter.
One official in the EU's trade directorate says Washington's imposition of what he describes as prohibitive tariffs on steel imports is another example of U.S. unilateralism, a word frequently used by European officials to describe what they perceive as Washington's go-it-alone attitude on a range of issues, from the environment to the war on terrorism.
But metals and mining analyst Mark Burridge, of Merrill Lynch in London, says he understands President Bush's dilemma. "On the one side you've got the unions and steel company management pulling him in one direction," he explains. "On the other side you've got steel consumers and U.S. trade partners like the EU pulling in another direction. So, it's almost like he's caught between a rock and a hard place, and whichever way he goes, he's going to end up annoying somebody."
EU officials argue that they do not want a confrontation with Washington. They suggest that, instead of imposing tariffs, the United States should tax both domestic and foreign steel products to cover pension costs of retirees from failed U.S. steel companies. They also say such a tax would help pay the cost of restructuring the ailing U.S. steel industry.