Republicans could be hit if trade war takes off
Charlotte Denny and Larry Elliott Saturday March 16, 2002 The Guardian
Brussels is planning to hit imports from key states targeted by the Republicans in this year's mid-term elections in revenge for President Bush's decision to slap heavy tariffs on European steel producers.
Amid signs of an escalating transatlantic trade war, a senior European official warned Washington yesterday that a failure to offer compensation for the $2bn in lost steel sales would trigger retaliatory tariffs from Brussels on American products.
Top of the list would be citrus fruit from Florida - the state which after accusations of electoral foul play won Mr Bush the 2000 presidential election - and American steel from Ohio, West Virginia and Pennsylvania, all seen as key battlegrounds for the Senate in the November elections.
Officials said the measures were still under consideration and would only be imposed if the US failed to compensate European industry for the Bush adminstration's decision last week to impose tariffs of up to 30% on steel imports.
Europe's top trade negotiator, Pascal Lamy, described the US move last week as "pork barrel" politics. The US steel mills which Washington claims have been swamped by foreign imports are all in politically sensitive states which the Republicans hope to win in November.
The US decision has already triggered an appeal from the EU and other affected producers to the World Trade Organisation (WTO), but with the case expected to take years to resolve, Brussels is exploring faster ways of hitting back at America.
Negotiators from the two sides will meet next week to discuss the steel tariffs, but Washington has already signalled that it is unlikely to offer any concessions to its biggest trading partner.
In a letter to the WTO's director, Mike Moore, the US ambassador described the EU's plans for fast-track retaliation measures as "deeply mistaken."
Trade analysts have warned that the bust-up between Brussels and Washington could threaten the new round of global trade negotiations launched last December.
European commission trade spokesman Anthony Gooch told a news conference that a list of US goods that might be affected would have to be presented by May 20 under the rules of the WTO.
"That is not to jump to the conclusion that we necessarily will [impose restrictions], but anyway we have to protect our rights," he said.
Europe has a further weapon up its sleeve - in April it will receive the go-ahead from the World Trade Organisation to impose tariffs on the US in a separate dispute of American tax breaks for its big exporters. Washington has described the EU's demand for $4bn in tariffs as the "nuclear option".
Although European trade officials insist that the two disputes are separate, the coincidence in timing means that by June the EU could be in a position to impose billions of dollars worth of tariffs on the American economy.
But with the world economy still in a fragile state after last year's recession, analysts are worried that a trade war could snuff out recent signs of recovery in the leading economies.