Europe Holds Fire in Tariff War With U.S.

BRUSSELS, Belgium -- The European Union said Friday it may load the gun of retaliatory sanctions against U.S. steel tariffs but hold fire to allow a final bid for compensation to avert a trans-Atlantic trade war.

"We would cock the gun in June without firing it immediately," an EU official said.

A European Commission statement said the 15 member states gave unanimous backing to a proposal to adopt by June 18 a list of U.S. goods liable to countervailing duties, but could leave a short time for negotiations before sanctions went into force.

"It was agreed that, in the interests of the EU, we might be willing to envisage a limited delay in their actual application if this would contribute toward the early and successful resolution of this matter," commission spokesman Anthony Gooch said in the statement.

The EU official said the move would preserve the EU's right to retaliate under World Trade Organization rules while allowing up to the end of July at the latest for a deal.

A satisfactory package would have to include both exemptions for some EU steel products from the tariffs of up to 30 percent imposed by U.S. President George W. Bush in March, and compensation in the form of lower U.S. duties on other goods, Gooch said.

Washington has so far refused to discuss compensation and has argued the EU cannot legally retaliate against the United States unless it wins a case against the tariffs at the WTO.

"From the start of the dispute over steel safeguards we have urged the EU to consider its interest in both solving problems in global steel markets and relying on WTO rules to resolve disputes," said Rich Mills, a spokesman for the U.S. trade representative.

"Unilateral trade retaliation will not benefit EU economic interests or the world trading system," Mills said.

The commission statement came after EU national trade officials met to review the dispute over tariffs imposed to protect uncompetitive U.S. steel producers, following a visit by U.S. Undersecretary of Commerce Grant Aldonas to Brussels on Thursday.

Aldonas said after talks with his EU counterpart in Brussels on Thursday that Washington could decide on some exclusions before June 18 for special steel products that do not rival U.S. output, with more to come by July 3.

He ruled out negotiating on the EU's demand for compensation in the form of reduced duties on other imports from Europe. But Brussels officials said they did expect Washington to offer some compensation once it saw that the EU remained united.

The prospect of exemptions has prompted Washington's closest EU allies -- Britain, Germany, the Netherlands and Sweden -- to lean toward delaying sanctions to avoid worsening trans-Atlantic relations.

Under the EU's weighted voting system, those four countries would have enough votes to block immediate retaliation, but they have not yet taken a final position and are backing commission efforts to negotiate for compensation.

Mills said he could not comment on whether the United States was trying to persuade certain member states to vote against the action.