A World Trade Organization appeals panel has ruled that duties introduced by the United States on imported steel are illegal under international trading rules. The European Union is threatening to impose sanctions on U.S. imports if Washington fails to drop the duties within weeks, and other countries could also join in.
The Geneva-based World Trade Organization upheld a ruling last July by a panel of trade judges that found the U.S. duties violate WTO rules.
When he imposed the tariffs in March 2002, President George Bush argued that they were necessary to protect U.S. steel producers during a period of restructuring. The United States asserted that the duties were justified to fend off a flood of cheap imports. But the WTO said in July that Washington had failed to prove its case.
The ruling by the WTO's top appellate body gives the European Union the green light to hit back at the United States with $2.2 billion worth of sanctions on U.S. goods, if Washington does not quickly withdraw the tariffs on imported steel.
Tony Murray, head of research at the Metal Bulletin, a London newsletter, said the European Union has drawn up a list of U.S. products on which it is threatening to impose 100 percent duties. "At the very beginning, [the EU] drew up a schedule, a hit list, if you like, of U.S. imports, with the aim to getting an equivalent value to the steel business they lost. It does not mean they are going to do it on steel. It will be on all sorts of possible products," he said.
The goods subject to EU retaliation range from cigarettes to paper products to orange juice, many of them produced in states that are crucial to President Bush's re-election efforts next year.
An official at the European Commission, which handles trade matters for the 15 nation European Union, says the bloc will start retaliating if the U.S. steel duties are still in place by mid-December.
But Gerard Walsh, an expert in U.S.-EU relations at the Economist Intelligence Unit in London, said any EU moves in that direction will probably spark another reaction from the United States. "In principle, there is no reason why this dispute could not actually carry on for another 18 months or so. If the European Union does impose tariffs, the U.S. is going to object. That, by itself, is probably going to take it to March 2005," he said.
The U.S. tariffs are supposed to run until March 2005. But the Bush administration, faced with political pressure from supporters and opponents of the measure at home, is studying whether to keep them in place.
Just last week, the European Commission said it would start imposing tariffs next March on more than $4 billion of U.S. goods in retaliation for a U.S. law granting tax breaks to U.S. exporters. The WTO says that law fails to conform to its rules.
Such countries as Japan, Brazil, China and South Korea, which also filed complaints against the U.S. steel duties, could now also seek to impose sanctions on U.S. products if Washington does not remove the tariffs.