The top trade official for the US and his counterpart from the EU swapped jabs over steel and farm subsidies, issues that threaten a trans-Atlantic trade war.
US Trade Representative Robert Zoellick on Tuesday defended President George W. Bush's imposition of tariffs up to 30 percent on foreign steel imports to protect American steelmakers and his signing into law of a huge increase in subsidies to American farmers.
PHOTO: REUTERS
Citing criticism from Europe that the moves betrayed the administration's free-trade principals, Zoellick said that it has become fashionable for European leaders to contend that the US was veering toward protectionism.
"Sanctimoniousness is a posture. It is not a policy," Zoellick told a global economic forum at the US Chamber of Commerce.
In reply, European Trade Commissioner Pascal Lamy, who spoke to the conference by satellite hookup, said the only conclusion one could draw was that the steel sanctions and the big increase in farm subsidies were supported by the administration with an eye toward winning votes for Republicans in key congressional races this November.
"These disputes ... do not stem from the rationality of economics," Lamy said. "They stem from the irrationality of politics."
Lamy said the administration has defended the moves as necessary to win congressional support for the authority Bush needs to negotiate trade agreements.
Legislation to that effect is pending before the Senate this week.
But Lamy said the tariffs on imported steel and the big boost in farm subsidies were too high a price to pay for a Bush victory on "trade promotion authority," which would allow Bush to negotiate trade deals that cannot be amended by Congress.
"We Europeans are not prepared to pay for TPA with steel protection," Lamy said. "If TPA has a price, it must not be too high a price."
Lamy said that the big increase in US government subsidies to farmers in the new farm bill would make it harder for Europe to continue to reduce its own high farm subsidies.
EU officials have charged that the farm bill that Bush signed into law last week violates WTO rules. Zoellick said the new subsidies would keep the US within the WTO cap of US$19.1 billion annually in US farm subsidies, and he noted that the 15-nation EU has a far higher WTO cap of US$60 billion in annual subsidies.
"In some ways, it is a buildup [in US subsidies] to build down," Zoellick said.
American negotiators, he said, would have more leverage to win concessions on the issue from Europe in the new global round of trade talks.
On the steel issue, Zoellick said the US believed it had acted within WTO rules when it imposed the tariffs of up to 30 percent on certain categories of steel imports to provide three years of protection to the domestic industry.
Europe has contended otherwise and threatens to impose its own sanctions of US$345 million on American exports to Europe, starting next month, unless Bush compensates Europe for the higher steel tariffs.
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