U.S. Feels The Heat In Steel War

It's not the first time, but it's definitely one of the worst times, in decades of tension between the U.S. and Japan over import rules in the two nations - fierce competitors in the world market for selling steel.

Japan threatened Wednesday to impose $85 million in retaliatory duties on American imports unless the United States backs away from steel tariffs ruled unfair by the World Trade Organization.

The threat followed one delivered earlier this month by the European Union and, if carried out, it would be the first time Japan has adopted sanctions under WTO rules targeting imports from its biggest trading partner.

The government officially notified the WTO on Wednesday of a list of "rebalancing" tariffs of up to 30 percent it is prepared to slap on American products including steel, plastics and clothing, the Foreign Ministry said in a statement.

Under WTO rules, Japan must wait 30 days before it can impose those duties, a Finance Ministry official told reporters. Prime Minister Junichiro Koizumi's Cabinet will make the final decision about whether to press ahead with retaliation, and the official said the government is waiting to see Washington's reaction to Wednesday's announcement.

He was briefing reporters on condition of anonymity after the Finance Ministry committee formally endorsed a list of possible sanctions Wednesday afternoon for submission to the Geneva-based trade watchdog.

Their value - $85.2 million - is roughly equal to the losses suffered by Japanese steelmakers due to "safeguard" tariffs imposed by the Bush administration in March 2002, the official said.

That's a fraction of the $57.8 billion in products that Japan imported from the United States last year, however, and less than the $2.2 billion in sanctions the EU is prepared to place on U.S. imports ranging from orange juice to pajamas.

President Bush has said the U.S. safeguards, which are scheduled to remain in place until March 2005, are intended to give breathing space to the battered U.S. steel industry.

Japan joined the EU, Norway, Korea, China, Switzerland, New Zealand and Brazil in challenging the legality of the tariffs at the WTO.

The United States lost an appeal Nov. 10, clearing the way for retaliatory action after the WTO's dispute settlement body formally adopts the ruling at a Dec. 1 meeting. Adoption is a formality and cannot be blocked by Washington.

The WTO's rules on dispute settlement allow for retaliatory measures under certain conditions. Since the trade organization was founded in 1995, Japan has never resorted to such measures against the United States, officials said.

The Foreign Ministry statement said Japan "strongly hopes the United States will immediately withdraw measures in violation of WTO rules."

Japanese Trade Minister Shoichi Nakagawa had previously warned his country was preparing to unveil retaliatory steps by the end of this month.

U.S. officials have argued that the safeguards on steel imports are in compliance with WTO rules and necessary to allow the reorganization of an ailing industry that has suffered more than 40 bankruptcies since 1997.

Japanese steelmakers dismiss that explanation as a smoke screen for protectionism.

"The safeguards are a protectionist attempt to blame imports for the U.S. industry's own problems including a lack of competitiveness," the Japan Iron and Steel Federation said in a statement earlier this month.

Also Wednesday, a South Korean trade official said his country might also level retaliatory measures on American products if the United States doesn't drop steel duties deemed unfair by the WTO.

South Korea's response has not been finalized, but it could entail "rebalancing measures against certain American imports," the Ministry of Foreign Affairs and Trade official said on condition of anonymity.

South Korea exported $874 million worth of steel products to the United States last year. It expects to sell more on the U.S. market if Washington removes the import barrier.