[Financial Times] US warns steel trade tensions may spread By Guy de Jonquières and Edward Alden in Washington Published: March 10 2002 21:22 | Last Updated: March 11 2002 01:14 The US administration has warned that strains in international trade relations could spread from steel to other sectors unless the European Union and Japan reflate their economies. Grant Aldonas, under-secretary of commerce for international trade and one of the architects of the decision last week to impose steel tariffs of up to 30 per cent, said other sectors affected could include agriculture and semiconductors. In an interview with the Financial Times, Mr Aldonas said: "We have told people over time that if you don't see stronger growth abroad, you end up seeing friction on the trade account," he said. "There is only so much patience that you have when you are talking about very serious macro-economic issues that have been out there for a long time." This is the first time the Bush administration has linked the steel measures to larger problems in the global economy. Mr Aldonas indicated Washington was determined to stand firm in the face of the international outcry its steel measures had provoked. "This is one of those situations ... where things have to get worse before they can get better," he said. He also said the US would reject EU demands for $2bn in immediate compensation for the steel curbs, in the form of lower barriers to other imports. Washington insists the EU should first prove its claims in the World Trade Organisation. The rejection means the EU must decide whether to escalate the dispute by retaliating against US exports or await the outcome of its separate legal challenge to the steel curbs in the WTO, which could last more than a year. Mr Aldonas said Washington was prepared to stiffen its stance on trade partly because it no longer feared unnerving financial markets. Such concerns led the US to accept much higher imports from east Asian economies after their 1997 financial crisis. However, Mr Aldonas pointed out that recent turmoil in Argentina had not spread. He said failure by the EU and Japan to reflate their economies, combined with the strength of the dollar, would imperil recovery by the US agriculture and high-technology industries, which depended heavily on sales abroad. On agriculture, Mr Aldonas said the effect of deflation in Japan and recession in Europe had been "to drag down commodity prices across the board in the US," while the strong dollar had hurt exports. He said Washington planned no specific trade measures to protect those sectors.
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