US to decide on exemptions as steel row softens

The US will decide today on requests to exempt up to 400 foreign steel products from import tariffs imposed in March, amid signs that the EU is retreating further from its threat of rapid retaliation against the US.

The July 3rd decision by the US has been pegged by the EU as crucial in determining whether Europe will hit back immediately with €378 million in retaliatory sanctions or wait until next year when the World Trade Organisation rules on the legality of the US tariffs.

EU Trade Commissioner Mr Pascal Lamy has said the US action on the first round of exemption requests, which must be completed today, is key to deciding whether he will recommend retaliation against the US. He will make his report to trade diplomats from the 15 EU states on July 19th before the proposal is passed to trade ministers on July 22nd for a final decision.

But Commission officials indicated yesterday that the EU would continue to take into account any additional exemptions offered by the US before July 19th, and may continue to consider those offered after that date.

The comments are further indication that the US and EU want face-saving ways to defuse a dispute that had threatened to spiral into tit-for-tat trade retaliation.

The exemption requests still facing the US administration include several very large categories of imports that US steel producers fear would open a big hole in the tariffs of as much as 30 per cent imposed in March.

Among the unresolved claims is a request by German steelmaker Thyssen for more than one million tonnes of imported steel used by carmaker DaimlerChrysler, which would exclude about one-10th of the 13 million tonnes of imported steel covered by the tariffs.

Representatives of European steel firms do not expect such large exclusions but hope that smaller, more specialised products will be added to the three lists already announced by the US, although the administration has warned some European steelmakers that those three lists may be all that is offered in the first round. But hundreds of other requests, filed after the US extended the initial deadline, can still be dealt with in the coming months, giving the US and the EU a convenient excuse to avoid further escalation.

There has been a gradual but consistent softening of the rhetoric coming from Brussels. Mr Lamy initially demanded a "package" of compensation and exemptions from the US to call off the retaliation. But then last week in Washington he said exemptions alone could suffice if sufficiently generous.

"We're simply trying to get the best deal we can for European interests," said a Commission official.