Tit-for-tat import tariffs could rebound on Europe

24 April 2002
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25 April 2002 | Robin Parker

Manufacturers dependent on US supplies could face sourcing problems if the European Union engages in a "tit for tat" trade war to hit back at tariffs on steel exports, trade bodies have warned.

European steel officials were meeting in Brussels this week to decide whether to penalise US goods to the same degree as the tariffs imposed on EU steel by President Bush last month.

The European Commission has drawn up a list of 316 US exports for potential sanctions.

The result of the vote must be with the World Trade Organisation (WTO) by 18 May, and the sanctions could be in place by the middle of next year.

The commission says the tariffs, due to last for three years, could cost steel producers more than $6 billion. The EU has already pledged to employ a previously unused WTO rule to compensate the industry temporarily if exports are hit.

Organisations have voiced concern that the dispute could extend to markets beyond steel.

Elizabeth Fox, trade policy director at the British Apparel and Textile Confederation, feared a reprise of the trade war over bananas three years ago.

In that dispute, the US put a 100 per cent tariff on cashmere from the EU, and American retailers cancelled all orders for cashmere products.

Fox said that if the US responds to the proposed retaliatory measures, exports of finished goods and imports of raw materials could be hit.

"The US is a big market for us, and also it will be impossible to immediately source materials such as cotton for the same price levels and quality elsewhere."

Lucy Findlay, policy adviser for the Confederation of British Industry, agreed.

"We support the basic safeguards, but introducing tariffs on US goods impacts this trade dispute on sectors and countries not remotely linked to the case."

The US put tariffs of up to 30 per cent on up to 10 categories of steel goods last month in a bid to help troubled domestic producers.

EU steel imports to the US have risen for the past three years, and amounted to 24 million tonnes in 2001.

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