The European Commission is preparing to impose as much as US$6 billion in tariffs on the US in retaliation for a Bush administration decision to block steel imports and because of a tax break the US gives exporters.
The commission will seek US$2 billion in damages from steel tariffs imposed by the US, in line with WTO rules. It's also readying US$4 billion in duties on imports from the US because of the tax break, which benefits exporters from Microsoft Corp to Boeing Co and was ruled illegal by the WTO.
"The US prefers to shift its problems to foreigners rather than accepting the responsibility of confronting tough domestic choices," said Carlo Trojan, the European ambassador to the WTO, in a letter to US officials warning of the retaliation.
The steel and export-tax disputes are among a number of disagreements that have soured trans-Atlantic trade relations.
Other quarrels involve e-commerce, genetically modified food and EU subsidies for Airbus SAS.
The US$4 billion in penalties in the export-tax dispute would be by far the biggest retaliation ever carried out in a WTO trade case -- more than 20 times higher than the US$190 million in sanctions the US imposed on Europe in a dispute over beef.
The WTO is set to decide on April 29 on the amount of retaliation it will allow in that case.
The commission, the EU's executive arm, is drawing up a list of products on which it will levy tariffs if the US refuses to pay compensation, said Anthony Gooch, a commission spokesman.
"The member states are acutely aware that we must prepare a detailed list of goods and products, and we are working to a May 20 deadline," Gooch said.
The US will have 60 days to agree on compensation or the commission may impose the duties on imports from the US.
While the commission won't specify which products will be singled out, the US$600 million in steel imports from the US is a possible target.
The EU will "use the full resources of the WTO system to minimize this damage and seek appropriate redress," Trojan said.
The US Treasury, Commerce Department and Office of the US Trade Representative declined to immediately comment.
President George W. Bush last week handed US Steel Corp, Nucor Corp and other US steelmakers a partial victory in their bid for protection when he levied tariffs ranging from 8 percent to 30 percent on most steel imports.
Bush's decision drew protests from government and steel industry officials across Europe and Asia. China, Australia, Japan and South Korea have each said they may appeal to the WTO.
Brazil's steelmakers said they may boycott the US coal industry, which sells US$200 million of the steel-grade coal each year to the Latin American country.
Steel imports to the US have dropped by about 25 percent, to 30 million tons, since 1998, when a surge of shipments from overseas began driving down prices.
That sent Bethlehem Steel Corp, LTV Corp and 17 other US steelmakers into bankruptcy.