NCPA - National Center for Policy Analysis

Europe Set to Retaliate For U.S. Steel Tariffs

March 25, 2002

A little protectionism can go a long way toward setting in motion a snowball of additional tariffs. European trade authorities have compiled a list of U.S. exports to Europe that it intends to tax in retaliation for President Bush's recent imposition of tariffs of up to 30 percent on some steel imports.

EU officials say the list of products to be sanctioned was drafted with its American domestic political impact in mind: citrus fruit because of its importance to Florida, where the 2000 presidential vote was so close; steel because of its importance to West Virginia and Pennsylvania; and textiles because of North and South Carolina. The four states are important battleground areas in midterm elections this year.

  • The European Union would tax some $2.1 billion worth of U.S. goods.
  • The EU has threatened sanctions if the U.S. does not agree to pay compensation for its actions to protect its steel industry.
  • Under World Trade Organization rules, the EU is permitted to impose sanctions as harsh as a 100 percent import tariff almost immediately -- if the U.S. cannot justify its actions.
  • But trade experts predict the EU will probably rely on the more thoroughgoing but slower dispute-resolution system at the WTO.

Under that procedure, which began last week, the EU has until May 20 to submit a list of products to be sanctioned. A draft list is now being circulated among EU-member nations.

The entire WTO process takes about 18 months, but EU officials reportedly prefer to go through the procedure rather than slapping sanctions on immediately.

Source: Paul Meller, "Europe Lists U.S. Imports It Plans to Tax," New York Times, March 23, 2002.

 

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