Steel across the Atlantic

The United States and European steel producing nations must now make every possible effort to hammer out a mutually acceptable agreement on low-cost steel imports to the United States.

For without such a settlement there is a considerable risk of a full-scale trade war breaking out between Europe and the US -- the last thing that the Western military and trading allies need during this period of economic difficulty.

What adds urgency to the steel import issue is the decision by the US Commerce Department last week to levy stiff countervailing duties on steel imports from some nine countries, seven of them European Common Market nations. The nine were found by Commerce to have been unfairly dumping steel products in the US. In the case of the European nations, the subsidies often amounted to as much as $250 a ton on steel sold for between $400 and $500 a ton. European officials, however, indignant at the decision, have announced possible retaliatory measures against a broad range of US goods sold in Europe that -- according to the Europeans -- benefit from special tax breaks and fiscal subsidies.

The irony in all this -- namely that the Commerce Department's actions came almost on the heels of the Versailles economic summit -- is not lost sight of in the United States or Europe. Commerce was merely meeting a deadline imposed upon it to reach a decision on imports after formal action was filed last January by domestic producers. But US and European leaders at Versailles promised to take all possible measures to thwart the rising tide of protectionism on both sides of the Atlantic.

The Commerce findings suggest that American producers do have a legitimate grievance. In effect, the Europeans appear to have been subsidizing steel exports to the US as a tolerably ''cheaper'' policy than would have been the case if European mills had been forced to shutter, or reduce, operations. Reducing operations, of course, would have meant that the governments involved would have had to pay larger domestic unemployment claims and face an intensifying of the social divisions that tend to accompany higher unemployment.

But the problem is that new penalties on European steel will likely do little to aid domestic US firms. Importers will merely turn to other steel-producing nations for low-cost steel. And, given the recession, US firms will have little flexibility in raising prices. The US industry is now operating at around 43 percent of capacity.

US trade representative William Brock has taken a sensible stance in stating that the US is ''willing to talk'' to the Europeans about a negotiated settlement and imposition of quotas. Everyone involved would seem best served by avoiding a fractious -- and unnecessary - trade war. Meantime, American producers must press ahead with plans to modernize their plants and operating policies. Only that -- in the long run -- can ensure a vigorous and competitive US industry.

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