- The Washington Times - Thursday, March 7, 2002

The European Union yesterday criticized President Bush's decision to slap high tariffs on steel imports, but U.S. Trade Representative Robert B. Zoellick is betting that European efforts to rally world opinion against the United States will fail.

Mr. Zoellick is wagering that Europe will not dare to upset global talks that are aimed at reducing excess capacity in the steel industry, which has driven prices and profits to record lows and is considered by economists to be the root cause of the worldwide steel crisis.

The Bush administration also hopes that the action on steel will not disturb just-started negotiations in the World Trade Organization, but Mr. Zoellick conceded that passion may trump reason.

"Part of this depends on whether the Europeans intend to be sanctimonious," Mr. Zoellick said.

He spoke after Mr. Bush announced plans Tuesday to hit steel imports from Europe, Asia and Latin American with tariffs between 8 percent and 30 percent. U.S. steel companies, many of which are in bankruptcy, had begged the administration to protect them from what they call "unfair" imports.

Even yesterday, National Steel, the Indiana subsidiary of Japan's NKK Corp., filed for Chapter 11 bankruptcy protection as part of a reorganization plan.

Much of the world spent the day raging at the American action.

"I consider this decision unacceptable," said German Chancellor Gerhard Schroeder, in comments echoed by leaders from France and Britain. "It's against free world markets."

But beneath the rhetoric, the world's leaders avoided promises of quick retaliation against the United States. Instead, they promised recourse at the Geneva-based World Trade Organization, a years-long legal process.

The European Union filed a protest with the World Trade Organization yesterday.

But even if the 15-nation European Union succeeds at the WTO, charging that imports are not a threat to the U.S. industry, other countries can only hope that the United States lift the tariffs. WTO rules do not allow retroactive compensation.

European trade commissioner Pascal Lamy avoided saying that Europe would pull out of the international negotiations on reducing steel-making capacity, though he predicted the U.S. action would "end any hope" of reaching a deal.

Mr. Lamy did hint yesterday that Europe might hit the United States with its own sanctions. But he said yesterday it was "too early" to take a decision on that point.

The Bush administration shaped the steel-tariff package to avoid irritating key allies in WTO talks that countries began in Qatar in November, while depriving Europe of allies in its bid for retaliation against the United States.

Europe must rely on Asian allies such as Japan, Korea and Taiwan, which were also hit by high tariffs, one European official pointed out.

"They're not free-traders," the official said. "But they'll do for the moment."

The White House emphasized the benefits of cooperation with the United States. For example, it exempted Canada, Mexico, Israel and Jordan from the sanctions because they are partners in free trade.

"One signal [Tuesdays action] sends is that it's good to have a free-trade agreement with the United States," Mr. Zoellick said.

The Bush administration avoided a devastating blow to Brazil, a country Mr. Zoellick has courted in WTO talks and in plans to create a free-trade zone covering all of North and South America, he said.

Brazilian Foreign Minister Celso Lafer hinted his country would go to the WTO. But he also said in a statement that "a preliminary analysis indicates that a significant portion of the quantity of steel currently exported from Brazil to the United States may be able to continue."

Mr. Bush's action also exempted a long list of developing countries from any tariffs at all, including virtually all African countries. Mr. Zoellick has courted their support in WTO negotiations and has announced plans to strike trade deals with several African countries.

South African Trade Minister Alec Irwin said in a statement that the exemption shows that Mr. Zoellick and Mr. Bush "take the [American] initiatives in Africa seriously."


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