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. Last Updated: 07/27/2016

Ruling Sparks Talk of Trade War

GENEVA -- European and Asian countries joined together Tuesday to demand that the United States drop its duties on imported steel or face the possibility of billions of dollars in retaliation.

The united call for change in U.S. trade policy followed Monday's ruling by the World Trade Organization's appeals panel that the duties -- introduced by the United States in March 2002 -- are illegal.

"I regret that the United States resorts to protectionism to deal with the restructuring problems of its steel industry," said Swedish Industry and Trade Minister Leif Pagrotsky.

The appeals body is the WTO's highest tribunal, and the decision is final. The United States criticized the ruling, and insisted it was right to impose the "safeguard" tariffs for three years to give its domestic steel industry time to restructure. It made no immediate announcement about its next step.

The case was brought by the EU and seven other countries, including Norway.

The 15-nation EU threatened to slap sanctions of up to $2.2 billion on U.S. imports such as citrus, textile products and Harley-Davidson motorcycles manufactured in the United States. EU officials said they will act if the U.S. steel duties are still in place five days after the report has been formally adopted by the WTO, which will likely happen on Dec. 1.

For three of the countries who brought the complaint -- China, Norway and Switzerland -- it was the first time that they had taken a case to the WTO under its dispute settlement procedure. In Asia, complainants Japan and China said they were ready to consider sanctions.

"Should the United States refuse to terminate its illegal practice, we will notify the WTO of our retaliatory measures based on the overall losses," Japanese Economy, Trade and Industry Minister Shoichi Nakagawa said in a statement.

Chinese Ministry of Foreign Affairs spokesman Liu Jianchao told a regular news briefing: "With respect to the further measures taken by various parties, it will depend on the attitude that the U.S. will take."

In Brazil there was caution. "This is not the time for Brazil to retaliate, even though it has the right to. It's time to establish a climate for negotiation," said Jose Augusto de Castro, director of the Brazilian Exporters Association.

In the United States, despite government insistence that its actions were legal and justified to protect the U.S. steel industry, the WTO ruling was welcomed by businesses that use steel to make their products.

"For the sake of the U.S. manufacturing sector, it's time to end the tariffs now," said William Gaskin, chairman of the steel task force of the Consuming Industries Trade Action Coalition.

But steel manufacturers urged Bush to stand firm.

"Our government and the American steel industry have diligently complied with the WTO safeguard procedures. A long process of public fact-finding by our trade commission has documented irrefutable evidence of unfair trade by foreign steel producers." said Leo Gerard, president of the United Steelworkers of America.