EU agrees £244m retaliation against US over steel tariffs

The European Union yesterday sent a tough message to the United States over the steel trade war, agreeing in principle a €378m (£244m) package of retaliatory measures which could be unleashed against Washington within two months.

However, in an effort to keep the door open to compromise, the EU said it will give the US administration a chance to offer compensation or exemptions before there is a final decision to hit back.

President George Bush triggered the increasingly bitter trade row in March when he imposed tariffs of up to 30 per cent on imported steel. These were billed as "safeguard measures" necessary because the US market was being flooded.

The EU has reacted angrily arguing that, in recent years, US steel imports have actually declined, and has accused the US of breaking World Trade Organisation rules.

The EU measures will target sensitive US goods including steel, textiles and orange juice to counter the American plans outlined in March.

Under WTO rules the EU counter-measures have to be lodged by 18 June, which has created a bureaucratic problem because the US will only decide whether to offer concessions to the EU on 3 July.

Under the latest timetable, the European Commission is to report by 19 July on the progress of talks with Washington and, if there is no progress by then, EU ministers will decide by 1 August whether to go ahead with sanctions. If the Commission believes there are grounds for optimism, a decision on sanctions could be delayed until 12 October.

Pascal Lamy, the EU Trade Commissioner, said the decision sent "a very clear political signal to our American friends" because of the unanimous support of the ministers. He added: "We are saying that using a safeguard does not come for free and we are going to negotiate very hard on the price."

The EU is also drawing up a separate list of longer term retaliatory measures, worth €606m, which would be implemented if it wins a panel in the WTO challenging the US tariffs.