GENEVA -- An appeals panel ruled yesterday that U.S. duties on imported steel introduced last year are illegal and the European Union is threatening to retaliate with $2.2 billion US worth of sanctions unless the U.S. government lifts the tariffs swiftly. The White House quickly disputed the decision by the World Trade Organization panel, which rejected the bulk of the U.S. appeal seeking to strike down a July ruling that the duties break WTO rules.
"We disagree with the overall WTO report and we are going to study it and look at its implications and go from there," said White House press secretary Scott McClellan, who would not offer a timetable for a White House decision on whether to rescind the tariffs.
"We believe (the duties) are fully consistent with WTO rules and we will carefully review those decisions."
The WTO issued its initial July ruling after a complaint from the 15-member European Union and seven other countries. In a joint statement yesterday, those countries said the U.S. government has "no other choice" but to remove the import duties without delay.
The punitive duties didn't apply to Canada or Mexico, countries whose steel trade is regulated under the North American free trade deal. But removal of the U.S. duties would probably depress U.S. steel prices under the pressure of cheap foreign steel imports, which would hurt big Canadian steelmakers such as Dofasco, Stelco, Algoma Steel and Ipsco, which either have major U.S. operations or export heavily into the United States.
European Union trade chief Pascal Lamy said in an interview the EU could impose sanctions on U.S. imports within weeks if Washington fails to drop the duties. Other countries could also join in.
The EU is threatening to impose up to $2.2 billion worth of sanctions on U.S. imports -- ranging from cigarettes to frozen vegetables to paper products -- by introducing 100 per cent duties, pricing the goods out of the EU market.
When his administration introduced the three-year duties of up to 30 per cent in March 2002, President George W. Bush took the position that they were justified to protect domestic steel producers during a period of restructuring.
The appeals panel upheld the major findings of the July report, which said the United States had failed to prove its industry had been harmed by a sudden flood of cheap imports -- a condition for imposing such duties under WTO rules.
