EU offers steel cuts

December 18, 2001: 12:28 p.m. ET

EU willing to reduce output to end trade dispute with U.S.

BRUSSELS (Reuters) - European Union trade chief Pascal Lamy said on Tuesday the EU was ready to make deep steel capacity cuts to reduce a global glut but made clear EU opposition to unilateral U.S. curbs on steel imports.

"We are ready to put on the table capacity cuts," Lamy told a news conference held jointly with visiting U.S. Trade Representative Robert Zoellick.

He said the EU would propose cumulative capacity cuts of 13 million tonnes of crude steel over the period from 1998 to the end of 2002.

The EU would make the offer at talks to discuss overcapacity in the global steel industry being held at the Organisation for Economic Cooperation and Development (OECD) in Paris, he said.

But Lamy gave a strong indication that the EU offer depended on the United States refraining from raising tariffs on steel imports.

"What we can do...in this field of capacity cutting will of course also depend on the impending decisions in the U.S. regarding future protective measures...," he said, adding later that the EU would not make output cuts "for free."

President George W. Bush's administration is seeking global cuts in excess steelmaking capacity to help struggling U.S. steel producers.

At the same time, the U.S. International Trade Commission has recommended a combination of increased tariffs and quota restrictions for up to four years to help the domestic steel industry regain its financial footing.

Lamy has previously threatened to launch a World Trade Organisation (WTO) dispute against the United States if Bush adopted the recommendation.

Lamy said on Tuesday the EU did not believe the United States had met the conditions laid down in international trade law to take defensive measures against a surge in exports.

Zoellick defended the U.S. actions to protect its steel industry, saying that over the past 20 years, the U.S. steel industry had shed about 64 percent of its jobs.

Zoellick said the United States may consider legal action if the EU does not end its three-year ban on approving new types of genetically modified crops, long a source of transatlantic friction.

"We will continue to try to work with our European counterparts to get the approval process going...but ultimately if there is no movement then we have to decide what other actions we would take under the international legal system," Zoellick said when asked if the United States could complain to the WTO over the issue.

Lamy and Zoellick began the news conference in self-congratulatory vein, praising each other for the progress made on the trade agenda this year, including last month's agreement to launch a new round of global trade talks and the resolution of several EU-U.S. trade disputes.

But by the end of the news conference they were haggling over steel trade data and the number of anti-dumping cases each side had launched, leading Zoellick to make a quip about the weakness of the euro.

"Maybe if this were a little stronger, the balance of trade would be different," Zoellick said, referring to the euro.

Zoellick voiced hope the EU and United States could resolve outstanding trade disputes, including potentially the most explosive row over U.S. tax breaks for exporters.

A WTO dispute panel has ruled against the U.S. scheme and a decision on a U.S. appeal is pending. The EU has threatened to impose up to $4 billion of sanctions on U.S. exports if it finally wins the case.