The European Union could impose preliminary measures to safeguard its steel and aluminum industries from imports initially intended for the U.S. as early as July, although a full investigation will take nine months, EU Trade Commissioner Cecilia Malmstrom said.
"We can take pre-measures in July already. This is what we are going to discuss. We want to see the preliminary outcomes of the investigation. It is possible," Malmstrom told Reuters on Monday, adding that there was already anecdotal evidence of steel intended for the U.S. market being diverted to Europe by U.S. tariffs.
Under WTO rules, the EU could impose "provisional safeguard" tariffs for up to 200 days if it makes a preliminary finding that increased imports have caused or are threatening to cause serious injury to its steel and aluminum sectors.
The European Commission, which oversees trade policy for the 28-member European Union, launched a study in late March into whether U.S. import tariffs warranted action to prevent mainly Asian producers flooding Europe with steel.
The U.S. tariffs of 25 percent on incoming steel and 10 percent on aluminum came into effect on March 23 and have also been imposed on EU producers since last Friday. The EU is also retaliating against the tariffs, which it sees as "safeguards" under the World Trade Organization rules, by imposing its own tariffs on a list of U.S. goods. "Everything we do is by the comma and WTO compatible, as opposed to some others," Malmstrom said. Trade wars were neither good nor easy to win, as U.S. President Donald Trump appeared to think, and the last few days had shown he had taken "a dangerous road," she said.
Regrets and threats
Trump has justified the metals tariffs by citing national security, which Malstrom described as "very innovative," since she could not see how EU trade could possibly be a threat. She regretted that Washington and Brussels had not managed to come to a settlement. "We offered a constructive agenda, a way forward, discussions on trade irritants, on issues that were of concern to the U.S., and also said that we could sit and look at a minor tariff-only trade agreement, including cars and car parts. And the U.S. rejected that. Now the ball is in their court."
The U.S. is also considering putting a similar tariff on cars, which Malmstrom said could lead to an "even bigger" retaliation than on steel. "If that were to happen it would be extremely unfortunate. It would have major consequences, not only in Europe but across the world."
WTO plan B
Trump has also caused a crisis in the WTO by blocking the appointment of appeals judges, which Malmstrom said would eventually stop the dispute system from functioning. "If that is what they are intending to do they are on the right track," she said, adding she had spoken to U.S. Trade Representative Robert Lighthizer about finding a solution, but so far, the U.S. had not been willing to engage. If the dispute system breaks down, the rest of the WTO members would need a workaround without the U.S., she said. "There could be a possibility to move towards a Plan B but I think we're not really there yet. We want to make sure all the plan A possibilities are exhausted because we would like very much the U.S. to be part of this system."