- The Washington Times - Tuesday, November 4, 2003

The European Union will slap trade sanctions on the United States next month unless President Bush lifts tariffs that are protecting domestic steel manufacturers, EU Trade Commissioner Pascal Lamy said yesterday.

“So if the U.S. does not move, retaliation is a racing certainty in mid-December,” Mr. Lamy said in a speech in Washington.

The World Trade Organization next week is scheduled to issue a final ruling on the steel tariffs, which Mr. Bush imposed in March 2002 to protect U.S. steel makers from foreign competition and shore up political support in steel states such as Pennsylvania and West Virginia.

The WTO has already said that the tariffs violate rules the United States adopted when it joined the global trade body. Next week’s final ruling, if decided against the United States, would allow EU retaliation. The 15-nation European Union has said sanctions would reach $2.2 billion on U.S. products.

The U.S. tariffs have bolstered prices, helping steel makers but harming companies that use the metal to make finished products. And the tariffs have angered trade partners who can no longer sell steel in the United States.

Mr. Bush can leave the tariffs in place for their three-year course, terminate them at the halfway point or look for some middle ground, such as allowing exemptions on a number of products. His administration has remained quiet on the timing or direction of any decision.

A senior administration official yesterday said that the two options, likely to be influenced by the WTO decision, are leaving them in place or lifting them entirely.

“I think it’s a relatively stark choice,” said Grant Aldonas, undersecretary of commerce for international trade.

Mr. Lamy, in Washington to meet with U.S. government officials, also said that the European Union plans to begin implementing trade sanctions against the United States in another long-standing dispute on export subsidies.

The WTO three years ago ruled that U.S. tax breaks on exports are illegal, opening the door to $4 billion in sanctions by the European Union. U.S. Trade Representative Robert B. Zoellick has called the measure a potential “nuclear bomb” on the world trading system.

The European Union plans to begin phasing in the sanctions starting in March, unless Congress and the Bush administration repeal the subsidy before next year, Mr. Lamy said.

EU member states today are scheduled to vote on a plan that would slap a 5 percent tariff on hundreds of U.S. products, and then add one percentage point per month over the following year.

The measure would affect U.S. companies that make jewelry, paper and wood products, toys, electrical machinery and other products by making them more expensive in Europe.

Congress is considering legislation to repeal the subsidy, worth about $50 billion over 10 years to U.S. companies, and to also significantly revamp the corporate tax code.

Separate measures have passed the House Ways and Means and the Senate Finance committees. But legislation would allow a three-year transition for companies before the export subsidies are completely eliminated, a time frame Mr. Lamy said is unacceptable.

Lawmakers were not pleased by the specter of a trade war.

“I impressed on Commissioner Lamy that sanctions will not in any way impact how quickly we move this legislation through the Congress,” said Sen. Charles E. Grassley, Iowa Republican and finance chairman, after a meeting with Mr. Lamy. “I also stressed how disappointed I am by the rhetoric coming out of Brussels threatening sanctions.”

Others in Congress condemned Mr. Lamy’s threats. Rep. Sander M. Levin, Michigan Democrat, said EU “saber rattling” and “bullying” should not sway lawmakers or the president.

“The Bush administration needs to stand tough against these EU threats,” Mr. Levin said.

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