Europe Plans
Huge Trade War With US
By Stephen Castle
Independent
11 November 2003
American jeans, Florida orange juice and
dozens of other US products could double in price from next month because
of a growing transatlantic trade war.
The World Trade
Organisation gave the European Union permission yesterday to impose
huge import tariffs, which will allow price increases of between 8 and
100 per cent on a range of goods.
The row, which began
when America imposed special duties of up to 30 per cent on European
steel last year, reached a climax yesterday when the trade watchdog
gave a final decision in favour of the EU. It said the US action was
"inconsistent" with free trade commitments. Europe can now
impose duties on products ranging from T-shirts and lavatory paper,
to bras, pantyhose, suspenders, ballpoint pens, ski suits and bowling
alley equipment. Harley Davidson motorcycles were included in an early
draft of the sanctions list, but were not included yesterday.
The EU says its
sanctions, amounting to ¤2.2bn (£1.5bn) a year, will come
into force on 15 December unless Washington drops its steel duties.
The sanctions would be the biggest in the history of the WTO.
Most of the affected
imports face tariffs of 30 per cent on top of existing duties, though
a small number will be set at 8 or 15 per cent and some at 100 per cent.
President George
Bush now faces a dilemma over whether to back down and remove the steel
tariffs. The American government issued a statement yesterday saying
that it disagreed with the ruling but would study it carefully.
The WTO's decision
comes at a sensitive time, with the US presidential campaign about to
begin in earnest. In drawing up its list of sanctions, the EU has deliberately
selected products from states which are crucial to President Bush's
electoral hopes.
The steel tariffs
have proved controversial in the US, where they dented President Bush's
credentials as an advocate of free trade and angered American-based
car makers. They say that the tariffs have increased the price of their
raw materials, causing job losses and making vehicles more expensive
for consumers.
But the White House
is also facing heavy political pressure from "rust-belt" states
such as Pennsylvania, West Virginia and Ohio to keep the steel import
duties, which are due to continue until 2005.
The steel row is
only one of a number of trade disputes which threaten to poison relations
between the EU and the US, and could help stymie prospects for economic
recovery. The EU has threatened to impose another set of sanctions against
Washington from next spring if it does not repeal tax breaks for American
exporters. Meanwhile, the WTO is considering a complaint from the US
that Europe is blocking the import of genetically modified products.
Washington is already retaliating against an EU ban on beef from cattle
which are given hormones to stimulate growth.
A spokeswoman for
the EU trade commissioner, Pascal Lamy, said the measures were "not
there to punish the US but to focus the minds of the US administration".
The EU did not need to use these sanctions, she said. A British official
argued that the WTO ruling "backs our view that the decision by
the US to impose these tariffs was wrong".
Richard Mills, a
spokesman for the US Trade Representative, said its tariff measures
were designed to give the US steel industry "breathing space needed
to restructure and consolidate thereby becoming stronger and more competitive".
This, he said, was consistent with WTO rules which allow short-term
measures to cover restructuring. He added: "We disagree with the
overall Appellate Body Findings. We will be reviewing the WTO report
carefully."
The WTO's director
general, Supachai Panitchpakdi, said he hoped the countries would be
able to solve the problem without resorting to sanctions.
"I'm sure there
will be some way out," he said yesterday. "I expect the conciliatory
approach that we have seen in the past, and I certainly recommend that
approach."