EU postpones imposition of sanctions on US over steel

The European Union has drawn back from imposing sanctions on the US in response to Washington's steep tariffs on steel imports. EU ambassadors, meeting in Brussels yesterday, approved unanimously a Commission proposal to postpone a decision on sanctions until September 30th.

The move came after the US announced fresh exemptions to the tariffs worth €60 million to European steel exporters. The Trade Commissioner, Mr Pascal Lamy, who is in New Zealand, said the postponement was designed to allow the US to make further concessions.

"Our job is to defend EU interests in the most effective way in order to achieve our objectives. On balance right now, the EU interest is best served by maintaining maximum pressure on the US to deliver a meaningful rebalancing package. The US has taken useful steps in this direction and has told us there is more to come, but there is much more to do," he said.

The US has imposed tariffs of up to 30 per cent on steel imports, a step the EU claims is in breach of World Trade Organisation (WTO) rules. The US President, Mr George W. Bush, has said he will make final decisions on how much steel to exempt from the duties by August 31st.

Early yesterday, Washington announced a package of exclusions worth more than €60 million to EU steel firms. This brings the total list of exclusions affecting European exporters to around €300 million.

Mr Peter Carl, a senior EU trade official, said yesterday the US tariffs had not yet caused much damage to European producers, partly because the price of steel in the US had risen by 80 per cent since their imposition. He insisted the decision to postpone imposing sanctions on Washington did not represent a climbdown by the EU.

"This is a means to an end. One does not engage in sanctions for the fun of it. One engages in them to reach objectives," he said.

A number of EU member-states, including the Republic, are uncomfortable with the idea of imposing trade sanctions on the US, fearing that sanctions could turn the steel dispute into a full-scale, transatlantic trade war, and want to wait until the WTO rules on the dispute next year.

Any decision to impose sanctions will require a qualified majority in the Council of Ministers, where EU governments meet.

The Commission announced last month that it would impose sanctions on €2.3 billion of US exports if Washington's steel tariffs are condemned by the WTO and the US does not lift them immediately. Mr Lamy warned yesterday that the US should not interpret the postponement of a decision to impose interim sanctions as an EU retreat.

"They know that we need to see substantial additional exclusions between now and September to avoid the adoption of countermeasures," he said.