Confirming its earlier ruling that the US safeguard measures under Section 201 are illegal, the Appellate Body of the World Trade Organization has rejected the American appeal. This means that a full-fledged trade war could break out unless the Bush administration cancels Section 201 within 30 days. Should it fail to do so, the EU will institute tariff penalties against a wide variety of American goods worth USD 2.2 billion, designed to inflict maximum damage in states that will play a critical roles in next year’s election. Other countries such as Japan, South Korea and Brazil will join penalising American goods.
Already before the ruling on the appeal, President Bush came under intense pressure to stop Section 201. Even the International Trade Commission (ITC), who originally argued for these safeguard measures, pointed out the negative effects of Section 201. The Institute for International Economics (IIE) in Washington DC estimates that the cost to steel users has been about USD 600 million in lost profits because of higher prices and 26,000 lost jobs.
