Asia warns US about illegal steel tariffs

Japan led other Asia-Pacific nations welcoming a World Trade Organization ruling that US steel tariffs violate global trading rules and warned it could take retaliatory measures if Washington rejects the decision.

South Korea, China and New Zealand, which along with Japan supported the EU-led legal protest against US safeguard measures, joined the chorus of approval for the WTO ruling announced on Monday.

In a 170-page report, a three-member WTO panel on Monday rejected the bulk of the US appeal of an earlier ruling that said duties of up to 30 percent introduced in March last year by the Bush administration breached trade rules.

The appeals body is the WTO's highest tribunal, and the decision is final.

In a joint statement, the countries that brought the case said the US had "no other choice" but to remove the import duties without delay. The EU said it will impose retaliatory sanctions of up to US$2.2 billion by introducing 100 percent duties on some US imports, effectively pricing those goods out of the EU market.

The US insisted it was right to impose the tariffs for three years.

"We disagree with the overall WTO report and we are going to study it and look at its implications and go from there," said White House spokesman Scott McClellan.

McClellan not offer a timetable for a decision by the White House on whether to rescind the tariffs or accept the sanctions. For several weeks, Bush has been studying a separate report from his international trade commission on the subject.

"The steel safeguards the president imposed were to provide our domestic steel industry an opportunity to adjust to import competition ... to give our domestic industry an opportunity to restructure and consolidate and become stronger and more competitive," McClellan said.

"We believe [the safeguards] are fully consistent with WTO rules and we will carefully review those decisions."

When his administration introduced the duties, Bush claimed they were justified to protect domestic steel producers during a period of restructuring.

But the complainants said Washington failed to prove that its industry was harmed by a sudden flood of cheap imports -- a condition for imposing such duties under WTO rules -- and that it unfairly excluded imports from countries the US had free trade agreements with at the time -- Canada, Mexico, Israel and Jordan.

The issue is a political football in the US, where the Bush administration is facing heavy pressure from steel-producing states to keep the tariffs in place.

But there also is domestic pressure to remove the tariffs from steel users such as automakers. They claim the move has increased the price of their materials, causing job losses in the industry and making vehicles more expensive for consumers.

The EU plans to target its tariffs at goods produced in important swing states in the 2004 presidential election. It says it will start retaliating if the US steel duties are still in place five days after the report has been formally adopted by the WTO, which must happen within 30 days.

Complaints were filed by Japan, South Korea, Norway, Switzerland, China, New Zealand and Brazil.

All of those countries could now seek to impose sanctions on US imports if the duties are not removed, and Tokyo already has warned it may retaliate.

"Should the US refuse to terminate its illegal practice, we will notify the WTO of our retaliatory measures based on the overall losses," Japan's Economy, Trade and Industry Minister Shoichi Nakagawa said in a statement yesterday.

"We do hope the United States will accept the ruling and terminate the measures immediately."

Nakagawa not specify the size of Japan's retaliatory sanctions, but the Mainichi newspaper said they could reach 10 billion yen (US$91.7 million).

South Korea said it was also weighing retaliation, but was still hoping to avoid such a showdown.

"We will urge the United States to lift the tariffs, and we hope for the best," said Sung Yoon-mo, an official at the Ministry of Commerce, Industry and Energy. "It's too early to say what we will do if they refuse. We will study various options we can take."

He confirmed that imposing retaliatory sanctions was one option.

South Korea exported US$874 million worth of steel products to the US last year. It expects that it will sell more in the US market if Washington removes the import barrier.