The European Commission has taken its dispute with the US over steel tariffs a step further. Storm clouds are looming over trade relations between Europe and America.
US import duties on steel have set the two heavyweights of world trade on a collision course.
In a first move against Washington, the European Union is to impose "safeguard" tariffs of 14.9 to 26 percent on steel imports to protect itself from a possible surge of material diverted away from the United States by high new duties, an official said on Monday.
"Our maximum tariff will be 26 percent," the EU official said.
Separately, the EU has decided which US products it wants to hit with two billion dollars of trade sanctions.
"The Commission has today provided member states with what it considers would be an appropriate list to be submitted to the WTO in order to protect our rights in the future to be able to impose counter measures on the United States over steel," Anthony Gooch, a spokesman for the European Union's executive arm said on Friday.
He declined to give further details, but an EU source said the list included steel, textiles, citrus products and items such as paper, rice and motorcycles. The list contains a detailed breakdown of each item to be hit by tariffs ranging from 30 percent to 10 percent.
This would be roughly in line with the US steel duties announced by Bush of up to 30 percent.
Gooch stressed that such retaliation would only come into force if attempts at getting compensation in the form of lower US import duties on other goods failed.
Hitting the US where it hurts
EU retaliation will target goods from states which are politically sensitive for President George W. Bush, according to a Wall Street Journal report.
Europe’s strategy, according to the Wall Street Journal, was to get Washington to change course on the steel tariffs by hurting regions and companies the Bush administration needs politically.
EU tariffs will therefore target states such as Florida, Wisconsin, Pennsylvania and West Virginia, where Bush battled for victory with a razor-thin margin in the 2000 election.
Gooch said the United States had used such tactics in past disputes with the EU over bananas and hormone-treated beef. It had targeted French cheese and wine because Paris was seen as the driving force of European protectionism.
EU member states will look at the sanctions list and decide whether to back it or drop items. The list has to go to the WTO by May 20.
The WTO, refereeing in the trade dispute, has already heard appeals from the EU, Japan and Australia to have the US steel duties overturned, although a decision could take a year.