Unfounded, unnecessary and unfair US action has forced us to take temporary steps to look after EU industry and EU workers

Pascal Lamy EU Trade Commissioner

European countries fear that, with the US market cut off, steelmakers will redirect their exports across the Atlantic - perhaps as much as 15 million tonnes, according to the European Commission.

"Unfounded, unnecessary and unfair US action has forced us to take temporary steps to look after EU industry and EU workers," said European Trade Commissioner Pascal Lamy.

"But we have done this without indulging in protectionism."

Bush's strategy

The US justified its decision by saying that unfair subsidies by foreign governments were driving its own steel producers to the wall.

But its overseas competitors have scorned this argument.

I would like to appeal to President Bush and his administration - do not proceed any further down this path

Romano Prodi President, European Commission

US steelmakers, they say, are inefficient, burdened by wasteful pay and pension agreements and have been shielded from the market forces which have driven breakneck consolidation elsewhere in the world.

Meanwhile, China has joined Europe, Japan and South Korea in filing a formal complaint against the US action with the World Trade Organisation.

It wants compensation from the US - perhaps in the form of lowered tariffs on other Chinese products.

Retaliation

The new tariff of 14.9-26% is initially limited to six months.

Not all the steel imported will qualify for the new levies.

Various categories of steel will carry their own thresholds, and imports above that mark will incur the tariffs within an overall tariff-free import quota of about 5.7 million tonnes.

Only about two fifths on imports in all will be affected, the EC has said.

While the "safeguards" are directed at foreign steel and are intended to offset the negative effects of the US move, other measures in the pipeline are more directly retaliatory.

They include about $2bn in planned levies on US textiles and citrus fruit. The latter will impact most heavily on Florida, the US state whose governor is President Bush's brother Jeb.

Different views

Romani Prodi, the president of the European Commission, warned the US not to go any further in its protectionism.

"I would like to use this opportunity to appeal to President Bush and his administration - do not proceed any further down this path," he told a news conference.

"We all have our legitimate interests to conserve but we must not let short-term domestic interests dictate our policy, nor should they be allowed to jeopardise the functioning of the market."

But in Germany the view was different.Economy Minister Werner Mueller warned that retaliation could do more harm than good.

"An escalation could have substantial effects for the entire German economy," he told Deutschland Radio Berlin.