WTO rebuffs U.S. on steel duties
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The EU is ready to retaliate with $2.2 billion in duties on U.S. goods.
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GENEVA, Switzerland (Reuters) -- The World Trade Organization's highest court ruled on Monday that U.S. steel duties violated trade laws and the European Union threatened Washington with heavy sanctions if they were not quickly removed.
Brussels says it is ready to retaliate with some $2.2 billion of its own duties on U.S. goods, selected for the maximum political impact, and that these could be in force by early next month if Washington does not heed the WTO verdict.
But the United States reaffirmed that it considered the duties, levied since March 2002 to protect its struggling steel industry, were "fully consistent'' with trade rules and gave no indication of how it would react.
"We disagree with the overall WTO report. We are going to study it, look at its implications and go from there,'' said White House spokesman Scott McClellan.
The U.S. administration, which faces presidential elections in November 2004, is under attack from political opponents for allegedly pushing its free trade agenda to the detriment of U.S. jobs and the domestic economy.
The WTO's Appellate Body, in a final verdict in the case, upheld a decision in July by a panel of trade judges that the so-called "safeguard'' measures were "inconsistent with the requirements (of the WTO).''
The 15-nation EU and seven countries -- including Japan, Brazil, South Korea and Switzerland -- complained to the Geneva-based WTO over the steel duties, initially levied at up to 30 percent but subsequently slightly reduced.
According to EU steel industry association Eurofer, European exports to the U.S. market for products covered by the tariffs fell almost 37 percent in the first year of their application.
The conflict is one of a number of high profile rows involving the United States and the EU and which threaten to sour the mood at troubled WTO talks on lowering barriers to world trade.
Raft of sanctions
Brussels is already preparing a raft of sanctions against U.S. exports after winning another multi-billion dollar WTO tussle with Washington over exporter tax breaks. The United States has taken aim at the EU over its effective ban on genetically modified crops.
The EU and its allies in the steel case hailed Monday's decision, saying in a joint statement it "leaves the United States with no other choice but to terminate its WTO incompatible safeguard measures without delay.''
The EU says it could begin imposing sanctions within five days of the court decision being formally adopted by WTO countries in a meeting of the disputes settlement body that must be held by early next month.
Approval is automatic as the ruling can only be rejected by the unanimous decision of all 146 member states.
Brussels said this meant sanctions could come into force by December 15 at the latest and warned Washington against seeking simply to replace the duties with some other "illegal measure.''
The United States argued the duties were needed to protect producers against a flood of cheap imports.
But the WTO declared it had failed to prove its industry was under real threat from imports of steel and steel products.
Amongst nine conclusions, the court did overturn two lower court decisions covering tin mill and stainless steel wire, but trade sources said that this did not affect the overall thrust of the ruling.
EU sources say sanctions would be set on products from politically sensitive states, such as Florida oranges.
But the U.S. government faces a dilemma.
Steel consumers have also been pressing for an end to the tariffs, initially imposed for three years, which they say they drive up costs at a time when world steel prices have been recovering sharply. But producers and steel unions are demanding they be kept.
Both consumers and producers are important constituents in battleground states in the run-up to the November election.
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