WTO: U.S. Trade Rules Illegal

President George Bush could decide as early as today what to do about the struggling steel industry. 020305, GD.
The World Trade Organization ruled Friday against heavy import duties on steel imposed by the Bush administration, saying they violate global trade rules.

The European Union and seven other countries had complained that the duties — supposed to protect the U.S. steel industry from cheap imports — were unfairly hurting their own producers.

"This is not just a partial victory, this is a full victory. We have been given satisfaction on all accounts," said EU spokeswoman Arancha Gonzalez.

In a joint statement, the eight complainants called on the United States to remove the measures "without delay." The EU said it was ready to impose $2.2 billion in retaliatory duties on U.S. imports.

Mr. Bush introduced the "safeguard" duties of up to 30 percent on steel products in March of last year. The administration argued the tariffs met WTO provisions allowing temporary duties for up to three years to protect a domestic industry from a flood of cheap imports and give it time to restructure.

Mr. Bush, during his 2000 presidential campaign, had vowed to protect the domestic steel industry — a pledge seen as key to his victory.

But the European Union and its allies complained the move breached a raft of WTO rules and threatened to raise import tariffs in response.

There was no immediate reaction from Washington to the ruling, which confirmed an interim ruling released in March. At that time, officials said they would appeal, which would allow the duties to remain a while longer.

In its ruling, the WTO panel, headed by Stefan Johannesson of Iceland, said Washington failed to prove its measures were necessary because of "unseen developments" in the world steel market.

The United States said the unforeseen developments were created by the combination of the Russian and Asian financial crises, the strong U.S. dollar and the strong U.S. economy.

On Friday, the panel said Washington had not shown how these events led to a sudden increase in imports — the primary requirement before safeguard duties can be imposed.

It also said the United States had acted illegally by exempting imports from certain countries from the duties. Canada and Mexico — Washington's partners in the North American Trade Agreement — were excluded, as were Israel and Jordan.

Gonzalez said the European Union was ready to introduce wide-ranging duties on U.S. imports unless the United States removes the duties within five days of the WTO's adopting the report.

The duties could be imposed on items ranging from footwear to fruit and vegetables.

The other countries that appealed the U.S. action were Japan, South Korea, China, Switzerland, Norway, New Zealand and Brazil. It was the first time China or Switzerland had taken a complaint to the WTO.

The steel tariffs are just one of several areas of disagreement between the United States and the European Union. Last week, the EU angered American biotech firms by imposing strict labeling requirements as a precondition to dropping its 5-year ban of genetically modified food.

Earlier this year, the WTO ruled U.S. tax benefits for corporations operating abroad are illegal and gave approval for the EU to impose as much as $4 billion in sanctions on U.S. imports in retaliation.