The EU says it will challenge the US tariffs on steel at the World Trade Organisation. Europe believes it has an airtight case, but others aren't so sure. Either way, a decision looks to be a long way off.
A trade war in the making?
The EU is furious that the US seems prepared to break international agreements on trade barriers.
EU Trade Commissioner Pascal Lamy has already said he will challenge the US on tariffs.
"When the US is caught between domestic pressure and respecting its international commitments, the former prevails," Lamy said. "The world steel market is not the wild west, where people do as they like. There are rules to guarantee the multilateral system."
Short sighted strategy
Clyde Prestowitz, president of the Economic Strategy Institute, said the tariffs will do little to help the US steel industry in the long run.
And although the decision may help US President George W. Bush's fellow Republicans in the coming elections, analysts are calling it bad trade policy, particularly for a self-styled champion of free trade.
Not only will the European Union and other trading partners challenge the decision at the World Trade Organisation, but the move will increase pressure on the EU to retaliate, which could spark a global trade war.
Intervention or no intervention?
In an apparent shift on the issue, the WTO’s designated director general Supachai Panitchpakdi, changed his mind on whether going to the WTO was the right way forward.
On Wednesday, he had said that steel-producing nations should try to reconcile their differences and only come to the WTO for a solution if those efforts failed.
But on Thursday Supachai told reporters that the WTO should intervene as soon as possible to resolve the row.
"My suggestion is that it might be a good idea to intervene as early as possible so that things will not get out of hand because you can get retaliation against retaliation," he said at a Malaysian economic conference.
"Then everyone will lose out. I think we need to intervene as early as possible," Supachai said.
Long winded process
The United States asserts the move is compatible with WTO rules.
The 1974 Trade Act lets the United States impose temporary "safeguard" import restrictions if the US International Trade Commission rules that an industry has been hit hard by imports.
In the case of steel imports, the International Trade Commission had done just that only last autumn.
"The WTO is the obvious forum in such a case," Dr. Razeen Sally of the London School of Economics told DW-Online.
"But justification in a legal sense has not been made clear." Razeen said.
Razeen said the process could drag on for years before an actual decision is reached.