Steel woes redux

["Ian Murray" <seamus2001@xxxxxxxxx>]

[this is getting comical....]

World Fumes at U.S. Steel Move, EU Hits Back

GENEVA/TOKYO (Reuters) - The European Union pledged on Wednesday
to hit back ``immediately'' at the United States through the
World Trade Organization (WTO) as steel producers went on a war
footing over hefty U.S. tariffs on steel imports.

Steel producers from around the globe blasted the decision by
President Bush to throw a barricade around the ailing U.S. steel
sector, which blames cheap imports for 31 bankruptcies since
1997.

They said the decision to levy ``safeguard'' duties of up to 30
percent on a range of steel products undermined the ideals of
free trade preached by Washington and risked triggering an
international trade war that could damage the world economy.

``Our analysis is...that this U.S. decision is political,
without any legal or even economic foundation,'' EU Trade
Commissioner Pascal Lamy said after the bloc's executive
discussed emergency measures.

Announcing an immediate appeal to the WTO, the world's trade
referee, Lamy said that the 15-state bloc would be seeking
compensation equal to the damage it said the United States was
causing EU industry.

A European diplomat said in Geneva that the EU would lodge its
complaint on Wednesday -- an unusually rapid response in a trade
row. ``The filing will be made later today,'' said the diplomat,
who declined to be identified.

Lamy, who said that the EU will be the biggest victim of the new
tariffs, added that the bloc would also act to stop a flood of
steel from other producers who had found their access to the
U.S. market blocked.

Contrasting the unilateral U.S. measures with EU respect for
multilateral trade rules, he said: ``We are going to act
according to the rule of international law, we are not going to
take 'Wild West' measures.''


WEIGHING MOVES

Other producing countries and regions were still weighing what
action to take, but Japan's Trade Minister Takeo Hiranuma said
that Japan and South Korea would be working closely with Europe.

Calling the decision ``regrettable,'' Japanese Foreign Minister
Yoriko Kawaguchi said the tariffs would ``have a negative impact
on open and fair trade'' and ``only postpone structural
adjustment of U.S. steel industry.''

Such determination was echoed in both hemispheres as others
declared their intention to fight the tariffs that will hit a
long list of countries including Brazil, Taiwan, Russia,
Germany, Turkey, France, China, Australia and the Netherlands.

French President Jacques Chirac, who is campaigning for
re-election, slammed the U.S. decision, calling it ``serious and
unacceptable'' and urged Europe to ``react vigorously and in a
united way.''

``I consider this decision unacceptable. It's against free world
markets,'' chimed in German Chancellor Gerhard Schroeder, who
also faces a tough election battle this year.

In announcing the tariffs, Bush said they would take effect on
March 20 and stay in place for three years. Canada, Mexico and a
number of developing countries are exempt.

Nations opposing the tariffs say the U.S. woes are due to years
of failure to restructure the steel sector and a strong dollar,
which has risen 23 percent against the euro in two years.

``The fundamental question is that the U.S. steel industry has
to be restructured, but the closure of markets is not necessary
to do that,'' Lamy said, noting that the EU had kept its market
open in the 1970s and 1980s while restructuring its own steel
sector with state aid.

The looming battle within the WTO would the second to involve
the United States and the EU.

Brussels is already seeking to impose a record $4.0 billion of
retaliatory duties against U.S. goods for Washington's use of
illegal export subsidies in defiance of a WTO ruling.

The U.S. decision comes less than a month after Bush toured East
Asia, urging Japan to overhaul its long-cosseted economy and
calling on China to live up to its pledges as a new member of
the WTO and promote free trade.

U.S. Trade Representative Robert Zoellick said those two
countries plus Taiwan, South Korea and the European Union stood
to lose most.


ANGER AT GO-IT-ALONE

As the chorus of opposition mounted, a common refrain was anger
over Washington's apparently go-it-alone response to the global
problem of excess capacity.

That scourge has hit steelmakers worldwide, denting profit
margins, forcing consolidation and driving down share prices.

Shares in South Korea's Pohang Iron and Steel Co, one of the
world's biggest steelmakers, dived almost six percent on the
tariff news, but later recovered to close down 2.78 percent.

Europe's major steel producers were down for the second straight
day on Wednesday.

``As Asian producers redirect exports to Europe, there will be
increased competition and the potential for disproportionate
price pressure on companies in an already weak market,'' said
John Meyer, a European metals analyst at SG Securities.

While investors fretted over a possible erosion of already
contracting revenues, analysts played down the possible impact.

``The overall impact will be limited,'' said Kim Gyung-jung, an
analyst at Samsung Securities Co. ``Demand from Asia and others
is recovering in line with a global economic rebound and it
should be big enough to offset the impact from higher U.S.
tariffs.''

Japan, the world's second-biggest steel producer after China,
last year exported 2.2 million tons of steel to the United
States, its biggest trading partner.

But analysts said U.S. dumping charges had already forced them
to branch out into niche products not made on American soil,
helping to soften the blow.

Chinese steel industry officials said they were unfazed by the
tariffs because exports to the United States were relatively
small -- about 700,000 tons of products worth more than $300
million last year.

But analysts said Chinese steel firms could face more
competition at home if foreign rivals try to ship more products
to China now that they face higher U.S. duties.

Elsewhere, a government source said Brazil would challenge the
tariffs at the World Trade Organization while steelmakers in
South Africa and Turkey forecast a devastating effect on the
world market even if their own countries were exempted.