A high-ranking European Economic Community official yesterday warned the Reagan administration that its tough talk of possible trade sanctions against European steel makers could have serious political and economic repercussions, possibly including rioting by Europe's unemployed.
The official, who asked that his name not be used, said he was speaking on behalf of the EEC. While not threatening direct retaliation against the United States by Europe, he said administration actions on steel could lead to "a lot of blood on the floor" politically and concern between heads of governments. The issue will be a prime subject at the Versailles economic summit next month, the official said.
If the administration takes drastic measures against foreign steel makers, European officials may feel pressure to take action on, for example, American agricultural products or the Domestic International Sales Corp., which allows U.S. companies overseas to defer certain taxes indefinitely. The Europeans have said the DISC deferment is an unfair subsidy, but last year agreed to drop the complaint temporarily.
However, the EEC official said pressure may build to renew complaints against the system.
The official was particularly critical of the decision last week by Commerce Secretary Malcolm Baldrige to consider imposing retroactive duties on any foreign steelmakers found to have violated trade laws. Baldrige, who is under pressure from the steel industry and Capitol Hill, said he may invoke an untested section of the Export Administration Act of 1979, allowing him to impose penalties retroactively to 90 days. Commerce is expected to make preliminary findings next month on 55 steel complaints brought against foreign steel makers.
The complaints allege that European and other foreign steel makers hurt U.S. steel makers by flooding the United States with imports priced below production costs or supported by government subsidies.
Commerce said the decision was intended to "penalize sudden foreign steel imports into the U.S. markets attempting to beat an import ruling deadline next month. Baldrige said the retroactivity "serves notice on importers and foreign suppliers that we will not allow the law to be flouted."
The EEC official said "it is in the interest of the United States not to be too extreme in interpreting" subsidies law in regard to the cases.
However, the official denied that the Europeans were asking for any special favors from the Reagan administration. He said government decision makers should consider international repercussions of their actions against trading partners.
The steel issue is critical in Europe because it could disrupt $2 billion in trade, and 250,000 steel jobs have been lost since 1974, the official said. He warned that any adverse decisions could result in riots in Europe and noted that 10,000 unemployed steelworkers in Brussels already have staged demonstrations there.
Voluntary restraint negotiations are probably out of the question because it would set a precedent and would force European steel makers into cartels, which are "viewed with distaste," the official said.