[CTRL] Bush to throw 'protectionist bombshell' at Europe

Carl Amedio Mon, 02 Jul 2001 08:30:38 -0700

MONDAY JULY 02 2001

Bush to throw 'protectionist bombshell' at Europe

FROM CHRIS AYRES IN NEW YORK

FEARS are growing that President Bush could throw a “protectionist
bombshell” at Europe in retaliation for it blocking the $42 billion (£30
billion) acquisition of Honeywell International by General Electric. The EU’s
decision to block the merger of the US industrial groups — which it could
announce as early as tomorrow — is the latest in a series of transatlantic
trade disputes that have strained relations between Washington and Brussels.
The disputes, which threaten to trigger a full-scale trade war between two of
the world’s biggest trading partners, come on top of transatlantic tensions
over other issues such as the environment. The most likely target of US
protectionism is the European steel industry. President Bush last week
angered the EU by using section 201 of the 1974 Trade Act to launch a
six-month investigation into the impact of European imports on the struggling
US steel industry. If the investigation finds that imports are harming the
US, President Bush can impose quotas on imports, punitive tariffs and other
protectionist measures. This could have a devastating effect on European
steelmakers, including Britain’s Corus, which export about five million
tonnes of finished steel products to the US a year. The steel dispute comes
amid an equally damaging row over tax subsidies given to US companies
operating in Europe. The World Trade Organisation (WTO) last month ruled that
the Bush Administration was breaking international trade regulations by
offering the subsidies, and opened the door for the EU to impose $4 billion
in sanctions against the US. Robert Zoellick, the US trade representative,
said that imposing the sanctions would be like dropping a “nuclear weapon”
on trade relations between the two continents. The US has already failed to
hide its anger over the EU’s rejection of the Honeywell deal. The EU also
last year blocked AOL Time Warner’s acquisition of EMI Group, the British
record company. There are concerns in Washington that the EU has a hidden
anti-US agenda. President Bush recently said that he was concerned about the
EU’s stance on Honeywell, while Donald Evans, the Commerce Secretary, pleaded
with the EU to clear the industrial merger. Attempts by Washington to
influence the EU’s investigation last month provoked a furious response from
Mario Monti, the EU’s Competition Commissioner. He said: “I deplore attempts
to misinform the public and to trigger political intervention. This is
entirely out of place in an antitrust case and has had no impact on the
Commission whatsoever. This is a matter of law and economics, not politics.”
Imposing tough sanctions on European steel imports would be a popular move
for President Bush in the US. The Speciality Steel Industry of North America,
said last week: “We believe that substantial dumping continues in the US
marketplace. We will closely monitor developments and, if and when
appropriate, will ask the Administration to initiate additional section 201
cases on affected products.” Washington and Brussels are already involved in
a related row over steel duties. The EU has threatened to take the US to a
WTO dispute panel over its “anti-subsidy duties” on steel imports from about
16 European companies. The EU won a similar WTO case last year against the US
over duties on imports of leaded bars produced by Corus.
.

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