Posted on Wed, Nov. 12, 2003 EU vows steel tariff reprisal By Naomi Koppel The Associated Press

GENEVA - America's allies appealed to President Bush on Tuesday to back off support for the U.S. steel industry or risk billions of dollars in sanctions that could spark a global trade war.

Members of the European Union are threatening to impose retaliatory sanctions on $2.2 billion worth of U.S. imports unless Bush removes duties on imported steel that he introduced in March 2002 to give breathing room to the embattled U.S. steel industry.

"As frank and loyal friends of the United States, we hope that Washington will remove as soon as possible the steel tariffs that are considered illegal by the World Trade Organization," said Adolfo Urso, Italy's Industry Ministry undersecretary in charge of foreign trade. "We want to ward off a commercial war that, in terms of its size, would be unprecedented."

To ensure that the sanctions hurt as much as possible, the EU action targets products from key states, including Florida oranges, cigarettes, apples and even Harley-Davidson motorcycles.

And the EU is not alone.

Norway issued a list of products for possible retaliation that included steel, clothing, wine, tobacco, sporting goods and hunting weapons. China -- the world's biggest steel producer -- and Japan announced that they also were considering sanctions.

The WTO's appeals body -- its highest tribunal -- ruled Monday that Bush's so-called safeguard duties of up to 30 percent are illegal under international rules. The decision, made after complaints from the EU and seven other countries, is binding.

The United States criticized the ruling and insisted that it was right in imposing the tariffs for three years to allow the recession-plagued industry time to restructure. It made no immediate announcement about its next step.

Bush is facing a tricky political balancing act. If he maintains the duties, he will have to deal with the sanctions. But if he removes the duties, he will anger steel states like Pennsylvania, Ohio and West Virginia.

Stuart Eizenstat, a former U.S. ambassador to the EU and top Clinton administration official, said he believed Bush officials should drop the duties.

"Having put [the duties] on, they've gotten the political advantage. Now they ought to be able to point to the WTO decision and say, 'We tried our best and now it's time to lift them,' " Eizenstat told The Associated Press.

Bush also faces domestic pressure to remove the tariffs, especially from steel-dependent industries like automakers. Those industries say the action has led to job losses in manufacturing industries and increased the cost of products for consumers.