Summit to expose EU rift with US on trade and terror

Romano Prodi, the European Commission president, put Europe on a collision course with the US yesterday, accusing Washington of consistently breaching world trade laws.

In an aggressive performance ahead of a summit tomorrow, Mr Prodi attacked President George Bush's decision to slap tariffs of up to 30 per cent on steel imports and suggested that it was typical of a wider American disregard for the rules of the World Trade Organisation (WTO).

The move lays the ground for a combative meeting between Mr Bush, his senior aides – including the Secretary of State, Colin Powell, and the US trade envoy Robert Zellick – and Mr Prodi, the EU foreign policy supremo, Javier Solana, and Jose Maria Aznar, prime minister of Spain, which holds the European Union presidency.

The talks are destined to be dominated by discussions over the Middle East, the fight against terrorism, and transatlantic rifts over trade.

Diplomats have spent recent days trying to play down economic disputes, but yesterday Mr Prodi defied pressure to concentrate on areas of greater consensus with the US, and hardened his rhetoric.

"Repeated American failures to respect World Trade Organisation rules only raises questions about US commitment to the WTO," Mr Prodi said at a press conference in Brussels. "They should adhere to the principles of the WTO."

The European Commission president added: "I cannot over-emphasise how disappointed we are at the decision taken to give the American steel industry yet more protection."

Mr Prodi's intervention was greeted with annoyance by some diplomats. One US official said: "We helped to establish the WTO and, along the line, we have honoured our commitments to the WTO process. In the steel issue we believe we are within our WTO rights."

The row over trade, and the threat that it will dominate the Washington summit, underlines the return to business as usual in the transatlantic relationship. Following the 11 September attacks, the EU and US pledged to unite behind a global campaign against terrorism. But, six months on, the EU and US find their deliberations overshadowed by familiar disputes.

Traditional concerns about US unilateralism, as exemplified by Mr Bush's rejection of the Kyoto Protocol on climate change, have resurfaced in Europe. Moreover, most EU member states remain concerned about suggestions of an American attack on Iraq.

That issue has been kept off the agenda but the rifts on trade policy will have to be discussed. The row over the US steel tariffs has prompted Brussels to threaten to impose import taxes of up to €377m (£232m) on US goods from June, as well as arguing for a reduction in US tariffs on other goods to compensate for the impact of the new duties.

In addition the EU is taking measures to prevent steel from other countries, which is now banned from the US, being dumped in the EU. Mr Prodi said yesterday that the EU had "no choice but to react" to Mr Bush's measures.

The United States has, in turn, hinted that retaliation by the EU could provoke further measures from Washington.

Two other trade disputes are on the horizon, one over an EU ban on hormone-treated beef from the US and a much bigger one over US tax breaks to exporters made available through the so-called foreign sales corporations. In June the WTO will grant the EU the right to impose between $1bn (£700m) and $4bn in retaliation over this dispute.

On the Middle East Mr Prodi indicated that the EU would urge the US to press Israel over its military activities in the occupied territories. Earlier this month the EU gave its full backing to General Powell's diplomatic mission to the Middle East, and agreed a policy statement with the US, the UN and Russia.

Mr Prodi denounced as "unacceptable" Israel's blocking of a UN fact-finding team to investigate what took place at the Jenin refugee camp. He argued: "If the army has nothing to hide there could be no reason not to allow the mission to go ahead."

On combating international terrorism, the EU argues that much progress has been made since last September. The EU has agreed in principle proposals for a European arrest warrant and moved to beef up contacts between Europol, which co-ordinates police co-operation in the EU, and the US. Efforts to co-ordinate policies on border controls and migration, and improve transatlantic links on extradition and criminal investigations, are also under way.