US condemned over return to protectionist policy

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UK and Switzerland in tit-for-tat row

The United States was last night looking totally isolated over its global trade policy after the world's other rich nations accused it of jeopardising free trade with a return to protectionist policies.

A host of industrialised countries attacked the US for imposing tariffs on steel and pumping billions of dollars into its farming industry, which they said jeopardised the successful launch of negotiations for a new global trade agreement.

In a major blow to the US Administration, the Organisation for Economic Co-operation and Development, made up of 30 wealthy nations including the UK, rebuked the US for pursuing protectionist policies.

Speaker after speaker lined up to condemn the US for its actions and to warn that it could undermine the progress made on trade negotiations at last year's conference in Doha.

The American position was further undermined by an unparalleled decision by the World Trade Organisation, the International Monetary Fund and the World Bank to publicly criticise the White House's stance.

In its communique, the OECD said: "We reaffirm our pledge to reject the use of protectionism. All members have the responsibility to ensure that the multi-lateral trading system functions effectively. The implementation of the Doha agenda should not be hindered."

The chair of the OECD meetings, Belgian Prime Minister Guy Verhofstadt, said: "We run the risk that protectionism from one side will create protectionism from the other." The US unsuccessfully fought to have the word protectionism removed, saying it was misleading.

In their strongly worded statement, the WTO, IMF and WB said any increase in protectionism was damaging. "Such actions will hurt growth prospects where fostering growth is most essential. They are sending the wrong signal, threatening to undermine the ability of governments everywhere to build support for market oriented reforms," it said.

Mike Moore, the head of the WTO, said major disputes between countries had the "potential to poison the atmosphere". "It becomes very difficult for ministers to defend and promote opening up their own economies if they see other countries increasing protectionism and blocking market access," he said.

The Cairns Group, which represents 17 agricultural economies including Australia, Canada and New Zealand, condemned the US for raising its domestic farm subsidies by 80 per cent. "It is damaging to the international economy and could undermine efforts to achieve global reform of this heavily subsidised and distorted sector," it said. "The impact will be particular damaging on developing economies.

"The new legislation makes the US administration's task of continuing to take a leading role in the Doha round more difficult. It will provide comfort for those WTO members who are determined to resist meaningful reform of the agricultural sector."

The US sparked the furious response when it decided to impose tariffs of 30 per cent for up to three years on steel imports, saying the move was needed to safeguard its steel-making industry. The European Union is proposing to impose $583m (£402m) of tariffs on various US imports in retaliation, saying the decision violated WTO rules.

Then this week President Bush signed a law that its opponents estimate will deliver $180bn of subsidies to its farmers. The EU said this would depress world food prices, making it harder for poor countries to compete and easier for US farmers to export to them. However the US insisted it was "fully committed" to negotiating a free trade deal.