Trade war threat to thousands of jobs

WASHINGTON'S THREAT of more sanctions is the latest warning shot in a bitter transatlantic trade war that could cost thousands of jobs and even undermine the basis of global trade.

Last night's move follows the pattern laid down in the explosive dispute between Europe and the United States over the European Union's banana import regime. That dispute is already hitting European exporters of luxury items valued at $500m (pounds 312m), from producers of Italian pecorino cheese to makers of Scottish cashmere sweaters. The Trade minister Brian Wilson last night said the Government would indemnify cashmere clothing exporters against losses.

Washington's latest threat of 100 per cent tariffs adds hundreds of companies and thousands of workers to the list of potential victims. As with moves in the banana war, the threatened reprisals for Europe's restrictions on American beef produced with hormones would affect countries across the continent, ranging from fruit and vegetable producers to beef and pork farmers, growers of cut flowers and even motorcycle makers.

Last night's list was provisional and will be reduced by early June. But British producers could take a share of the pain. The items picked out by Washington for 100 per cent tariffs include a range of meat products, mineral water, carrots, onions, oats, soups, mustard and chocolate.

Mediterranean countries would be hard hit, with peaches, tomatoes, fruit juices and satsumas all featuring.

But how serious is the threat, and how has it come about? The EU and the US are now locked in an exchange of threat and counter-threat over trade, each claiming justice is on its side, each appealing to the World Trade Organisation for moral support. A crunch will come next month when the WTO rules on the banana row, a point at which the very basis of global trading rules could come unstuck.

The beef hormone dispute and the banana row have inevitably become entwined. Hormones are widely used in America for stimulating growth of cattle, and the US claims it is losing hundreds of millions of dollars in sales to Europe each year because of the EU ban on imports. The WTO has ordered the EU to remove the restrictions by 13 May, unless it can prove that hormone-treated beef is dangerous to health.

Brussels says it will not have completed scientific studies by the May deadline, and it intends to keep the ban in place until the end of the year.

It has suggested three forms of action: offering compensation, introducing a regime of labelling or turning the present "permanent" ban into a "temporary" one.

Discussions have already taken place on labelling but without success. The US is happy for the country of origin to be displayed, but not the fact that the beef is hormone-treated. Brussels does not think that is good enough. Changing the status of the ban is unlikely to satisfy Washington, which leaves the compensation option the most likely.

Brussels was sanguine about the American action, pointing out that the US is not planning unilateral action or breaking WTO rules. In the elaborate game of international chess, this may be a tactical move.

Cough Drops and Cut Flowers On Hit List

THE LIST of EU products that could face sanctions from the US includes the following categories of food:

t Beef, fresh, chilled or frozen; pork, fresh, chilled or frozen; beef and pork offal, fresh, chilled or frozen; the meat and edible offal of poultry (chickens, ducks, geese, turkeys and guineas), fresh, chilled or frozen

t Sausages; hams and other smoked and salted meats; Roquefort cheese

t Tomatoes, fresh or chilled; onions over 16mm in diameter

t Chocolate; chewing gum and cough drops, not containing cocoa

t Cut flowers

t Truffles, fresh or chilled

t Raspberry jam and other types of preserves

t Hair clippers with self-contained electric motors

t Motorcycles with engines of up to 500cc.

t Mineral waters