EU Strikes Back at US in Steel Spat

The European Commission intends to swoop down on a number of US exports which include fruit, T-shirts, steel, guns and even billiard tables.

Moreover the products targeted are politically sensitive ones – from states crucial to US president George Bush’s reelection.

They include citrus fruits from Florida, apples and pears from Washington and Oregon, and steel from Pennsylvania, Ohio and West Virginia.

The European Commission’s retaliatory proposal - which calls for 100 percent duties to be imposed from June 18 on goods worth 377 million euro ($335 million) - would require majority backing from the 15 EU member states.

EU turns the heat on Washington

The EU hopes to use the European Commission’s proposal for leverage – it’s aimed to step up pressure on the US to reconsider its decision of imposing tariffs of 30 percent on steel imports, which includes 2.4 billion euro of steel from Europe.

But it’s still not clear whether EU states will go ahead with the politically explosive decision.

Some EU states including Germany and the Nordic countries have already expressed concern about the implications.

Another question that the EU will have to deal with is whether short-term retaliation would be legal under World Trade Organisation rules.

The US has already warned the EU of unilateral trade action that it says would "flout" WTO rules.

The US has said that any EU sanctions would strike at the heart of the free trade system.

G7 meet overshadowed by trade dispute

Earlier a meeting of G7 finance ministers meeting in Washington was marred by public displeasure from European officials over hefty US duties on imported steel.

The G7 – the United States, Britain, Canada, France, Germany, Italy and Japan – forged unity after the September 11 attacks in New York.

But European heavyweights said at the meeting that some of that unity had been blighted by Washington’s protectionist stance towards trade.

They also described the looming trade dispute between the US and the EU as one of the main hindrances to the recovery of the global economy.

European Central Bank President Wim Duisenberg called the US sanctions "regrettable and dangerous" and Pedro Solbes, the European Commission’s most senior economic official said that retaliation was still an option.

German Finance Minister Hans Eichel requested his American counterpart Paul O´ Neill to rethink US steel policy and drop the tariffs.