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U.S. Steel Tariffs Get Bad Reviews

Leading U.S. allies and trade partners warned of retaliation Wednesday after the Bush administration slapped punitive tariffs on steel imports, pledging to fight a decision they said violates world trade rules.

The European Union and South Korea said they would challenge the United States before the World Trade Organization. China expressed "strong dissatisfaction" with the tariffs, and Japan and Australia were also considering complaints to the WTO, which oversees global trade.

"The steel market worldwide is not the wild west where everybody just does what they like," EU Trade Commissioner Pascal Lamy said after an emergency meeting of the EU's executive body. "There are disciplinary rules."

Unwilling to wait months or years for a WTO ruling, the EU began planning more immediate measures to protect its own industry against steel diverted from the United States from pouring into its "fragile" market and driving down prices.

"We have to exercise our right to protect our industry and our jobs," Lamy said. He said government ministers from the 15 EU countries would discuss details of the short-term measures Tuesday.

Italy said the EU should not wait that long. A WTO appeal is necessary, Italian Deputy Industry Minister Adolfo Urso said, "but that must be accompanied by instant measures to defend the EU market."

Lamy also said the EU would also consider seeking compensation from the United States through retaliatory tariffs once damage to the European industry is quantified under WTO rules.

About two-thirds of the $4.5 billion worth of steel products the EU exports to the United States annually are jeopardized by the new tariffs, which range from 8 to 30 percent.

Lamy did not say how high the EU tariffs could go or what products might be targeted; Brussels-based lawyers said it could reach $3.8 billion over three years. Any EU action needs approval from the 15 EU governments, most of which expressed deep dismay over the tariffs.

German Chancellor Gerhard Schroeder called Mr. Bush's decision "totally unacceptable." Britain's trade secretary, Patricia Hewitt, said she and Prime Minister Tony Blair were "bitterly disappointed."

"We are now embarking on new trade negotiations to try to cut tariffs across the world and it really is shocking that America has taken this action, clearly in defiance of WTO rules," Hewitt told British Broadcasting Corp. radio.

The top trade official in Russia, already on the verge of a trade war with the United States over chicken imports, said Russia was considering retaliation for the steel tariffs but hoped to find compromise on both issues.

"It cannot be ruled out that if this question, which is very sensitive for us, is not resolved, Russia would introduce retaliatory measures," Gherman Gref, the minister of economics and trade, said of the steel tariffs.

He said they could cost Russia up to $500 million a year. Steel accounts for one-tenth of Russia's trade with the United States.

In announcing the tariffs, Mr. Bush said they would take effect March 20 and stay in place for three years. Canada, Mexico and a number of developing countries are exempt.

He denied that Washington was breaking world trade rules, saying the action was a response to decades of government subsidies in other countries.

However, the United States faces congressional elections this autumn and votes from the big steel states could be crucial. Mr. Bush hopes the GOP will regain control of the Senate and fight off a Democratic challenge in the House.

Nations opposing the tariffs say U.S. woes are due to years of failure to restructure its steel sector and a strong dollar, which has risen 23 percent against the euro in two years.

"The fundamental question is that the U.S. steel industry has to be restructured, but the closure of markets is not necessary to do that," Lamy said, noting that the EU had kept its market open in the 1970s and 1980s while restructuring its own steel sector with state aid.

The U.S. decision came less than a month after Mr. Bush toured East Asia, urging Japan to overhaul its long-cosseted economy and calling on China to live up to its pledges as a new member of the WTO and promote free trade.

Trade envoys in Geneva said the tariff furor could seriously damage newly launched global free trade talks and undermine the goodwill won by the United States in agreeing to discuss sensitive issues in the so-called Doha Round.