EC holds fire on US 'protectionism'

EUROPE signalled yesterday that it was prepared to give the United States the benefit of the doubt and wait until a crucial US-EC meeting next week before labelling the Clinton administration protectionist and risking an all-out trade war with retaliatory action.

Sir Leon Brittan, the EC external trade commissioner, said yesterday: 'I understand the temptation to flex one's muscles if one is new and playing to a domestic audience but the solution for us is not to go down that road ourselves.

'The only possible solution is a fair and negotiated one. The Community will not allow itself to be bullied.'

The US onslaught began with the imposition last week of punitive tariffs on dollars 1bn (pounds 690m) worth of EC and other flat-rolled steel exports to America. Coming on the back of duties applied last November it was a blow for a steel industry already struggling to restructure and cut over-production. On Monday America announced its intention of blocking federal contracts for products and services from the EC in response to Community legislation affecting telecommunications and procurement that came into effect on 1 January this year.

Trade is only the most obvious manifestation of the problems the EC is having accommodating the new Clinton administration, whose clear desire to be seen to be doing something is similarly exemplified in the US desire to act with a firmer hand in the former Yugoslavia, while the Community is committed to the implementation of the Owen-Vance peace plan through diplomatic negotiation.

But there were clear signs yesterday that EC patience is wearing thin. The Danish Foreign Minister, Niels Helveg Petersen, emerging from a meeting with his colleagues, said: 'After this second example (of US protectionism) it is hard to believe it's just an accident.' The ministerial meeting unanimously condemned the US measures but was circumspect in its response, expressing 'grave concern' and endorsing the 'sharp criticism expressed by the Commission', which complained of 'unilateral bullying'.

Only France and Portugal pressed for immediate counter-sanctions but were voted down. The final communique said only: 'We reserve the right to take action as appropriate.' Bruno Durieux, French Minister for Foreign Trade, complained the only weapons the US knew how to use were intimidation and unilateralism.

'Clearly there is much anger. We want to get on with the US but have aggressive trade measures thrown at us before we have even had a chance to meet,' said an official yesterday. 'We need to see whether it is just a sign of the new administration trying to find its feet or a real sign of protectionism.' Sir Leon Brittan is due to meet the US Commerce Secretary, Ron Brown, and the country's special trade representative, Mickey Kantor - a Clinton confidant - for the first time on 11 February to discuss trade issues.

The US action has added to tension besetting the stalled Gatt trade talks. No one is sure whether the US administration will be prepared to extend beyond the 1 March deadline the so-called 'fast track', which prevents Congress effectively blocking trade legislation by tying unrelated amendments to it. Without such an extension the talks are doomed.

The US maintains that EC efforts to liberalise the telecommunications market discriminate against US companies bidding for contracts in the EC. They have raised similar criticisms about EC policy on the award of public works contracts. Water, energy, transport and telecommunications are now thrown open to EC-wide tender.

'What we can't understand and what gives us hope that the US has not turned truly protectionist is the fact that they have chosen to complain about procurement. They really haven't got a leg to stand on when you look at their own procedures,' said an official involved in the formulation of Community trade policy.