The European Commission (EC) recommended to the Council of Ministers the postponement until 30 September of its decision on the application of short-term sanctions against the US in response to the US's protectionist steel safeguards, but warned that further US steps are necessary.

Welcoming the latest US concessions, EU trade commissioner Pascal Lamy, said: "Our job is to defend EU interests in the most effective way in order to achieve our objectives. On balance, right now the EU interest is best served by maintaining maximum pressure on the US to deliver a meaningful rebalancing package.

"The US have taken useful steps in this direction and have told us there is more to come, but there is much more to do. They know that we need to see substantial additional exclusions between now and September to avoid the adoption of countermeasures".

Whilst the EC considers that the US' re-balancing actions to date fall short of the EU companies' priority requests for product exclusions, it was concluded that the imposition of sanctions now could have been counterproductive to efforts to persuade the US to grant additional product exclusions by 31 August. The US decision to grant a significant batch of exclusions this morning weighed strongly in the EC's deliberations which led to the recommendation to hold fire.

Consequently, the EC agreed not to make further US concessions any more difficult to grant and to show restraint and to hold off the decision on whether to impose sanctions until 30 September, in the light of the decisions on product exclusions and compensation to be made by the US in the intervening period. The EC will report to the Council again ahead of this date.

The EC also concluded that, although the impact of the US measures on the EU had been relatively limited to date, the absence of further significant product exclusions would, with time, inevitably aggravate the negative effects of the US steel safeguards on EU exporters, as well as on US consumers.

The EC expressed its concern about the likelihood of a further crisis following the continued lack of restructuring of the US steel industry, this would be combined with the expected collapse of US steel prices, from their current artificially high levels, once the US measures are terminated after their condemnation by the WTO, as the EU expects.

The EC also recalled its decision, taken on 13 June, to impose sanctions on €2300m of US exports (the so-called "long list" of €606m duty) when the US measures are condemned by the WTO (expected in September 2003) unless the US then immediately removes these illegal measures.

Latest US exclusion package

The latest package, announced this morning, contained exclusions requested by European steel firms or their American customers, with an estimated value of over US$60m. This brings the total value of the five lists of exclusions to around US$300m, i.e. 30% higher than on 17 July . Total volume is also around a quarter higher than the figure included in the EC's report published on 17 July.