Global Policy Forum

By Elizabeth Becker

The United States lost a major trade dispute to Europe today, with the World Trade Organization ruling that the steel tariffs imposed by President Bush last year were illegal. The administration said immediately that it would appeal the decision. While the trade decision was interim, with the final report expected next month, it is rare for an interim decision to be reversed.

Mr. Bush imposed tariffs of nearly 30 percent on most types of steel imported into the United States from Europe, Asia and South America last spring, the biggest government action to protect a domestic industry in several decades. The case against the tariffs was brought by the European Union which charged that the United States was illegally protecting the steel industry. Pascal Lamy, the European Union's trade commissioner, called the tariffs "unjustified, highly protectionist U.S. measures." When the initial case was brought against the United States, Mr. Lamy predicted, "I am in no doubt that the U.S. will lose this case, as it has lost all six previous safeguard cases."

But there was no celebratory statement or any comment from the Europeans today. European officials said they would not discuss an interim decision, but some officials also said Europe wanted to avoid creating a further division with the United States during the war in Iraq.

Today's ruling was the second major loss for the United States at the World Trade Organization in the last year. The trade panel awarded Europe the right to impose $4 billion worth of trade sanctions against the United States for giving tax breaks to American exporters through foreign sales corporations. If the United States loses the final decision next month, Europe will have a similar right to impose trade sanctions against the United States.

When administration officials imposed the steel tariffs, they said the tariffs were legal under world trading rules in response to a surge of steel imports. At the same time, the tariffs were meant to provide the American steel industry enough breathing space to find their footing in the global market. Trade officials said today that the strategy worked.

"The domestic steel industry has undergone an unprecedented level of consolidation and restructuring over the last year that has made it more competitive," a trade official said. In Congressional hearings today, steel officials and union representatives praised the tariffs for providing aid and support to their industry.

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