WTO Appeals Panel: U.S. Steel Duties Illegal

U.S. duties on imported steel (search) introduced last year are illegal under international trade rules, a World Trade Organization (search) appeals panel ruled Monday, according to trade officials.

The panel upheld the major findings of a July ruling -- issued after a complaint from the European Union (search) and seven other countries -- that said the duties break WTO rules, the officials said on condition of anonymity.

The EU has threatened to impose sanctions on U.S. imports if it fails to drop the duties within weeks, and other countries also could join in.

When his administration introduced the three-year duties of up to 30 percent in March 2002, President Bush claimed they were justified to protect domestic steel producers -- including those in Ohio -- during a period of restructuring.

The officials declined to give specific details on the panel's ruling before it is made public later Monday.

But, they said, the appeals panel upheld the major findings of the July report, which said the United States failed to prove its industry was harmed by a sudden flood of cheap imports -- a precondition for imposing such duties under WTO rules.

That report also said it was illegal for Washington to exclude imports from the countries with which it then had free trade agreements -- Canada, Mexico, Israel and Jordan.

EU Trade Commissioner Pascal Lamy said in Washington last week that EU retaliation would be a certainty if the ruling goes against the United States.

The 15-nation EU has drafted a list of $435 million worth of U.S. imports, ranging from cigarettes to frozen vegetables to paper products, on which it is threatening to impose 100 percent import duties, effectively pricing the goods out of the EU market.

To increase political pressure, many of the products targeted are produced in swing states that would be crucial to Bush's re-election campaign next year.

The White House also is facing heavy political pressure in the dispute, especially from steel-producing states such as Pennsylvania, West Virginia and Ohio, where campaigners want the tariffs kept in place. The Bush administration has been reviewing whether to maintain the duties for the full three-year coverage period, which would run past the elections until March 2005.

Brussels says it will start retaliating if the U.S. steel duties are still in place five days after the report has been formally adopted by the WTO, which would likely be at the end of November.

Complaints were also filed by Japan, South Korea, Norway, Switzerland, China, New Zealand and Brazil. All of those countries also could now seek to impose sanctions on U.S. imports if the duties are not removed.

WTO Director-General Supachai Panitchpakdi said earlier Monday he hopes the countries will be able to solve the problem without resorting to sanctions.

"I'm sure there will be some way out," Supachai said, speaking in Beijing. "I expect the conciliatory approach that we have seen in the past, and I certainly recommend that approach."

As well as provoking an outcry among Washington's trading partners, the steel duties have been heavily criticized by some groups within the United States, especially automakers. They claim the move has increased the price of their materials, causing job losses in the industry and making vehicles more expensive for consumers.