EU lashes out at U.S. in steel row

The tariffs on steel imports will stay in place for three years

BRUSSELS, Belgium -- The European Union is preparing to retaliate against the U.S. as the row over President Bush's imposition of punitive tariffs on steel imports continues to escalate.

Trade Commissioner Pascal Lamy said the EU was planning safeguards to protect its own steel industry, declaring: "We have to exercise our right to protect our industry and our jobs."

President George W. Bush announced the tariffs on Tuesday -- throwing a lifeline to the struggling U.S. domestic steel industry, but also setting the stage for a global trade war.

And in a rare move, British Prime Minister Tony Blair on Wednesday added his voice to the growing chorus of anger reverberating around the world following what is largely seen as a protectionist move by Bush.

VIDEO The European Union prepares to fight back: CNN's Diana Muriel reports (March 6) Play video (QuickTime, Real or Windows Media) Daniel Ikenson of the Cato Institute discusses the pros and cons of a protectionist steel policy Play video (QuickTime, Real or Windows Media)   MORE STORIES • Euro steel stocks suffer  • Asia ready to fight  • Bush backs tariffs    RESOURCES Q&A: Tariffs prompt strong response    CNN.com Europe More news  from our European edition    QUICKVOTE Is Europe justified in challenging U.S. steel tariffs? Yes No View Results

Other top steel producers -- including Japan, Russia, South Korea and Brazil -- have also vowed to fight the new barriers erected by Washington.

Japanese Trade Minister Takeo Hiranuma called the U.S. move "deeply regrettable" and said he doubted the plight of the U.S. steel industry justified the tariffs.

Japan, the world's second-biggest steel producer after China, exported 2.2 million tonnes of steel to the United States in 2001. Shares in its top steelmaker, Nippon Steel Corp, fell after the news. More Asian reaction

In Britain, Blair described the U.S. decision, announced on Tuesday, to impose 30 percent tariffs on a wide range of steel imports as totally unjustified.

"These are unacceptable and wrong," he told the UK's parliament.

Blair has worked continuously to position Britain as Washington's closest ally following the September 11 suicide attacks on U.S. cities, and his statement was a rare show of prime ministerial criticism of America.

He called on the U.S. steel industry to restructure rather than hide behind trade barriers, adding: "We have made representations at every level of government. We will continue to do so through the European Union."

European steel stocks suffered on Wednesday and chief executives echoed European politicians in accusing Washington of protectionism. Markets reaction, with about 20 percent of world production, according to EU figures.

Lamy has not elaborated on how high any retaliatory EU tariffs may go, or what products they may target.

"It's not a question of, 'You kick me in the shin, I punch you in the nose,"' Lamy said. But he accused the United States of violating WTO commitments and said the EU would avail itself of its right to seek compensation once the damage is quantified.

"The steel market worldwide is not the wild west where everybody just does what they like," he said. "There are disciplinary rules." The measures will be discussed by ministers from the 15 EU countries next Tuesday.

U.S. steel firms uncompetitive: EU

The EU argues that the problems facing the U.S. steel industry come not from imports, which have been decreasing, but from its failure to make itself competitive during the 1990s.

By contrast, European steelmakers have been consolidating in recent years into global giants such as ThyssenKrupp, Corus and Arcelor.

The U.S. decision comes less than a month after President Bush toured East Asia, calling on China to live up to its pledges as a new member of the WTO and promote free trade.

U.S. Trade Representative Robert Zoellick said China, Japan, Taiwan, South Korea and the European Union stood to lose most by the measures.

The tariffs will take effect on March 20 and will stay in place for three years.

U.S. steel firms and unions blame cheap imports for 31 bankruptcies in the past four years and had demanded a 40 percent tariff to protect the domestic industry. Bush backs tariffs

CNN's Todd Benjamin said Bush's decision was political. "He has got an election coming up and he wants to look good to the voters.

"In the U.S. they consume 20 percent more steel than they produce so they do need some of those imports.

"And it's a spurious argument about protecting jobs. Some manufacturers say tariffs could raise prices and make it more difficult to produce their products," he said.