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Tue, Mar 12, 2002 - Page 21 News List

Friction may affect other sectors

REUTERS , LONDON

The US administration has warned that strains in international trade relations could spread from steel to other sectors unless the EU countries and Japan reflate their economies, the Financial Times Web site reported on Sunday.

US Commerce Undersecretary Grant Aldonas, one of the architects of the decision to impose steel tariffs of up to 30 percent, told the Financial Times in an interview that other sectors affected could include agriculture and semiconductors.

"We have told people over time that if you don't see stronger growth abroad, you end up seeing friction on the trade account," the Financial Times quoted Aldonas as saying.

"There is only so much patience that you have when you are talking about very serious macro-economic issues."

Aldonas said Washington was determined to stand firm in the face of the international outcry its steel measures had provoked.

"This is one of those situations ... where things have to get worse before they can get better," he said.

Aldonas said the US would reject EU demands for US$2 billion (?1.4 billion) in immediate compensation for the steel curbs, in the form of lower barriers to other imports, the Financial Times reported.

Washington insists the EU should first prove its claims in the WTO.

Aldonas said Washington was prepared to stiffen its stance on trade partly because it no longer feared unnerving financial markets, the Financial Times reported.

He said failure by the EU and Japan to reflate their economies, combined with the strength of the dollar, would imperil recovery by the US agriculture and high-technology industries, which depended on sales abroad.

Meanwhile, European Commission President Romani Prodi said on Sunday the EU would do all in its power to resolve a steel trade war after the US decision to hike up steel tariffs provoked angry reaction.

"We have resolved many commercial wars, we will resolve this one, using all the instruments of law and negotiation available to us," Prodi said during a press conference in the northern Italian lagoon city of Venice.

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