Global Policy Forum

by Larry Elliott, Heather Stewart, Michael White, and Ian Black

The European Union yesterday vowed to use every legal weapon at its disposal to protect jobs in Europe's steel industry, as it accused George Bush of using "wild west" tactics by placing swingeing tariffs on steel imports into the US.

Amid growing fears that Washington's unilateral action to impose steel tariffs of up to 30% could spark a full-blown trade war, Pascal Lamy, the EU's trade commissioner, sought to control the rising tide of global anger by resisting calls for immediate tit for tat retaliation.

"We will do everything we can to protect our own industry and jobs, but unlike the Americans we will remain within the multilateral disciplines that we have. We are not going to behave like in the wild west where everyone does as he likes."

The EU plans to lodge a formal complaint with the World Trade Organisation and will invoke WTO rules that allow it to impose its own protectionist measures if steel imports surge as a result of the US move.

Brussels is certain to be joined by other steel producing nations in its legal fight to overturn the American decision while Russia, which is not a member of the global trading organisation, has threatened direct retaliation. Although a WTO action could last several years, the US could be faced with a massive bill for compensation should it lose, as most trade analysts believe it will.

The latest US casualty of the global steel glut came yesterday as National Steel Corporation filed for protection against creditors with $2.6bn (£1.8bn) of debt. Mr Lamy was left in no doubt yesterday as to the fury of the European steel industry at the US move. Tony Pedder, chief executive of Corus, Britain's largest steel producer, called for the EU to hit back with copycat tariffs. "EU and government officials have had several months to prepare their responses since the US announced its intentions. They should not hide be hind procedural niceties or technicalities."

Mr Pedder's hardline approach was echoed in the Commons, where Tony Blair yesterday had to fend off criticism of the government's handling of the issue from the Conservatives and his own backbenchers.

The Conservative leader, Iain Duncan Smith, sought to link the US tariffs to Mr Blair's recent support for the Indian-based Mittal steel group's purchase of a Romanian steel plant, at the same time as the Labour-supporting Mittal's US operations had been urging Washington to impose tariffs.

"The only measure we have had out of 10 Downing Street on steel is their support for a non-UK steel manufacturer. It took you 30 seconds to write a letter supporting a non-British company producing anti-British policies, yet it takes you months and months to write a letter to the US president standing up for British interests," Mr Duncan Smith said.

Mr Blair said the tariffs were "unacceptable and wrong. In our view the problems of the American steel industry are best solved by restructuring that industry, not by imposing abitrary and unjustified tariffs".

The former Labour minister, Jack Cunningham, warned: "It's dishonest of the American leadership to call for more open markets and free trade while at the same time cynically resorting to classical protectionism of their own industries."

The trade and industry secretary, Patricia Hewitt, said steelworkers would be justified in feeling anger. "It is a tragedy that the American administration that played such a crucial role in securing a new round of world trade negotiations ... has now resorted to naked protectionism."

Pointing out that the US steel industry was not competitive, Mr Lamy argued that Mr Bush's measures would not solve its difficulties. "A lot of these companies are on the verge of bankruptcy and these decisions are not going to help," he added

. Mr Lamy conceded that there was a risk of a protectionist spiral, but insisted the EU had a right under WTO rules to protect industry and jobs by asking for safeguards. Retaliation could embrace a wide range of products since the US imports only a tiny quantity of steel into the EU.

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