EU to escalate steel dispute by imposing strict import quotas

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The Independent Online

The European Union is poised to escalate the steel trade war sparked off by the US by imposing curbs on all steel imports into the EU, perhaps as early as tomorrow.

Pascal Lamy, the EU's Trade Commissioner, is expected to announce a range of quotas and tariffs on £7bn worth of steel imports.

The move is designed to prevent countries such as Japan, Korea and Poland dumping steel otherwise destined for the US before the Bush administration imposed swingeing import tariffs last month.

EU member states are expected to back the introduction of strict quotas on steel imports. Any shipments above and beyond this will then be subject to tariffs.

The EU import curbs will last for an initial period of six months. They were proposed in a confidential paper circulated to member states last Friday and are expected to be approved when the EU's "safeguard committee" meets today under the chairmanship of Mr Lamy.

Steel companies, such as the Anglo-Dutch producer Corus, have been pressing for the quotas to be set at a level which reflects the volume of imports into the EU before President Bush first indicated he was planning to impose duties on US steel imports a year ago.

Since the US declared its intentions, there has been a sharp rise in the amount of steel from third countries diverted from the US into the European market.

Steel imports into the EU have rocketed from 23 million tonnes in 1999 to 29 million tonnes last year. In some product categories, such as hot-rolled coil, steel imports doubled between the third quarter of 2000 and the third quarter of last year to 600,000 tonnes a month.

The UK's Trade and Industry Secretary, Patricia Hewitt, is pursuing a twin-track strategy of backing EU action while at the same time persuading US manufacturers to put pressure on the Bush administration to exempt some categories of British-made steel from import tariffs.

Tony Pedder, the chief executive of Corus, said yesterday: "We have made ministers very aware of the potential threat to the EU market. There are good signs that we will see safeguard measures introduced to ensure there is not an additional flow of steel into Europe."

He was speaking as Corus announced losses of £462m for last year, passed the dividend and confirmed that its aluminium division has been put up for sale with a price tag of £1bn. Corus also announced that a further 4,000 jobs would go over the next two years but stressed these were not new.

The proceeds from the sale of the group's Dutch-based aluminium division, which made profits of £58m last year on sales of £1.1bn, will be used to pay down debts, which stood at £1.56bn at the end of last year.

Although Corus is quite a small player in the aluminium industry compared with the likes of Alcan and Alcoa, it has high market shares in specialised areas of the car, rail and aerospace markets which could cause problems with competition authorities.

The group's carbon steels business lost £446m. The loss was blamed on weak demand, a sharp reduction in prices, the disruption caused by last year's closure programme and an explosion at the Port Talbot works in which three men were killed.