Clinton set to retaliate over EC directive

PRESIDENT CLINTON appeared set last night to approve punitive restrictions on government purchasing of certain European goods in retaliation against European Community procurement rules considered discriminatory by Washington.

The measure, which would target limited categories of products, would further strain trade relations between EC governments and the Clinton administration, damaged earlier this week by the imposition of US tariffs on steel.

Canada added to the tension yesterday by announcing that it would impose provisional duties of up to 124.2 per cent on steel imports from the US, Britain, Germany, France, Italy and New Zealand following dumping complaints by Canadian steelmakers.

As with the steel dispute, Mr Clinton finds himself partially boxed in by policies set by the Bush administration. The US pledged a year ago to apply sanctions against the EC if the procurement issue was not settled by now.

The argument is over the EC's utilities directive, which came into force on 1 January, setting common rules for government purchasing of equipment in the telecommunications, transport, power-generation and water-supply sectors. It includes a provision that permits discrimination against goods with less than 50 per cent European content.

US officials say the directive will close access to Europe, particularly for American telecoms and power-generation suppliers. In his recent Senate confirmation hearing, the new US Trade Representative, Mickey Kantor, signalled that retaliation may be imminent. 'The United States must respond to the new utilities directive of the European Community,' he said.

Efforts to negotiate a settlement to the dispute are closely tied to the wider world trade talks of the General Agreement on Tariffs and Trade, which remain in deadlock. 'A year ago, we all thought Gatt would be settled by now and this problem would have gone away,' one official said.

Arthur Dunkel, the Gatt director general, told the World Economic Forum in Davos, Switzerland, yesterday that he did not expect agreement before a US deadline for quick congressional acceptance runs out on March 1.

A European diplomat closely involved in the issue warned that the US move would be greeted with dismay. 'This is not at all covered by international trade rules and would be a completely arbitrary, strong-arm tactic by the US to force its own perspective on the negotiations'.

The latest row and the dispute over steel are certain to mar a first meeting on 11 February in Washington between Mr Kantor and Sir Leon Brittan, who was recently appointed to oversee international trade for the European Commission. They will also seek an opening in the Gatt negotiations.

In an ironic twist to the steel saga, which was prompted by the US announcement on Wednesday of dumping duties on foreign imports, Charles Corry, the chairman of America's largest steel manufacturer, USX Corporation, conceded that orders at the Pittsburgh-based company were surging, leading to the possibility of a shortage of supplies in the US.

Revealing that orders at USX climbed 50 per cent in the last quarter of 1992, Mr Corry said it was hard to discern whether the surge was the result of the import curbs, which had been signalled well in advance. 'I think we'll do materially better in steel if we simply don't have the unlawfully subsidised and dumped production to compete against,' he said.

He added: 'If the present order rate that we have experienced recently were to continue through the first quarter, there would without a doubt be a shortage of steel.'

The Clinton administration may also shortly be asked to consider legislation setting a floor price for oil imports by way of a variable levy. A bill that envisages a minimum price of dollars 25 a barrel was introduced to Congress this week by the chairman of the Senate Energy Committee, Bennett Johnson.

(Photograph omitted)