EU Proposes Levy on All Steel Sold in U.S.

In a novel bid to help rescue the struggling U.S. steel industry and avert a trade war, the European Union asked the United States on Thursday to impose a levy on all steel sold in the United States.

Speaking to reporters on the sidelines of a meeting of the world's largest steel-making countries, Peter Carl, who heads the European Commission's trade department, said the proposal was part of a three-point EU plan aimed at solving the world steel sector's woes.

He said the proposed levy would be more far-reaching than a similar one imposed in the EU several years ago, and that proceeds from the levy would go to offset huge pension costs faced by U.S. steel companies.

"What we are proposing is that the U.S. government introduce a levy covering all steel sold in the United States, including imported steel," Carl told reporters at the start of the talks at the Organisation for Economic Cooperation and Development.

He said the levy would eliminate the need for Washington to slap tariffs only on imported steel in order to protect its own steel sector, thereby avoiding a potentially costly trade war.

"We think this would be a better solution than the U.S. recourse to a tariff at the border, and also that it is in the interest of steel companies worldwide that the situation in the U.S. be taken care of in comprehensive manner," he said.

The Bush administration has until March 6 to decide whether to slap tariffs on steel imports, and many countries see this week's talks in Paris as a last-ditch chance to avoid a severe shock to the global steel industry.

Carl said that the EU's three-point action plan had been initially well received by countries attending the two-day talks, including the United States, which he said had given a "positive response" to the proposals.

"We are cautiously encouraged by the reception given to this action plan by other colleagues, but since the discussion only started two hours ago, I can't give other details," Carl said.

The EU's plan also called on governments to make immediate political commitments to eliminate subsidies for the steel sector, Carl said.

U.S. steel producers blame cheap imports — most of which they say are subsidised or sold below cost — for 29 bankruptcies over the past four years. They want 40 percent tariffs on 16 different steel product lines as part of a U.S. industry plan to consolidate and close plants.

However, key steel producers like Brazil, the EU and South Korea say the biggest problem facing the United States is its own bloated and inefficient steel industry that simply cannot compete on the world market, and they are warning Washington not to make matters worse by putting up barriers.