The Next War: Trade war between EU and US?

American jeans, Florida orange juice and dozens of other US products could double in price from next month because of a growing transatlantic trade war.

The World Trade Organisation gave the European Union permission yesterday to impose huge import tariffs, which will allow price increases of between 8 and 100 per cent on a range of goods.

The row, which began when America imposed special duties of up to 30 per cent on European steel last year, reached a climax yesterday when the trade watchdog gave a final decision in favour of the EU. It said the US action was "inconsistent" with free trade commitments. Europe can now impose duties on products ranging from T-shirts and lavatory paper, to bras, pantyhose, suspenders, ballpoint pens, ski suits and bowling alley equipment. Harley Davidson motorcycles were included in an early draft of the sanctions list, but were not included yesterday.

"Should the United States refuse to terminate its illegal practice, we will notify the WTO of our retaliatory measures based on the overall losses," Japan's Economy, Trade and Industry Minister Shoichi Nakagawa said in a statement. "We do hope the United States will accept the ruling and terminate the measures immediately."

Nakagawa did not specify the size of Japan's retaliatory sanctions, but the Mainichi newspaper said they could reach $91.7 million.

South Korea said Tuesday it was also weighing retaliation, but was still hoping to avoid such a showdown.

"We will urge the United States to lift the tariffs, and we hope for the best," said Sung Yoon-mo, an official at the Ministry of Commerce, Industry and Energy. "It's too early to say what we will do if they refuse. We will study various options we can take."

He confirmed that imposing retaliatory sanctions was one option.

South Korea exported $874 million worth of steel products to the United States last year. It expects that it will sell more in the U.S. market if Washington removes the import barrier.

In New Zealand, which has also filed a complaint, Trade Minister Jim Sutton said that while the domestic steel industry was small by international standards, it made an important contribution to the economy.

"New Zealand, along with the other countries involved, would encourage the U.S. to remove the safeguards without delay," he said.

Complaints against the U.S. duties have also been filed by Norway, Switzerland, China and Brazil.

THE STEEL TARIFFS imposed by President George W. Bush last year helped save 2,400 jobs at U.S. Steel's Granite City Works and resurrect 125 more in Alton. The tariffs did their job.

Now it's time to phase out the tariffs in order to preserve jobs for thousands of other Americans. Those workers are at risk because our manufacturers must pay more for steel than their foreign competitors.

Mr. Bush imposed tariffs on about a third of steel imports in the spring of last year. Those were on top of penalties already imposed on foreign steel dumped in the United States at below cost. At the time, steel prices were in free-fall and steel companies were tumbling into bankruptcy. Laclede Steel in Alton went broke in 2001, putting 550 workers on the street. National Steel, owner of Granite City Steel, went bankrupt last year.

The tariffs allowed U.S. steelmakers to raise prices, giving them breathing room. That allowed an orderly consolidation, as healthy companies bought terminal ones. U.S. Steel rescued the Granite City Works. The Alton mill reopened this year with new owners. Companies mercilessly cut costs, dumping pensions and cutting retirees' medical insurance. Companies raised money to modernize production.

Meanwhile, higher steel prices - some types jumped 30 percent - hurt U.S. manufacturers. Now tariffs probably are costing more jobs than they've saved. Using calculations from federal trade officials, economist Gary Hufbauer of the Institute for International Economics guesses that the sanctions may well have cost more than 12,000 U.S. jobs, and could go as high as 43,000.