Snow hints at US climbdown over steel tariffs

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Signs multiplied yesterday that President Bush is close to lifting his controversial steel import tariffs, which were ruled illegal by the World Trade Organisation and are now the possible trigger for a trade war between the US and Europe.

The latest hint was dropped by John Snow, the Treasury Secretary, who seemed to speak of the whole issue in the past tense during a television interview. The tariffs were introduced in March 2002, Mr Snow noted, before he joined the Bush economic team.

"I wasn't part of the administration when they were imposed, but I think they served a useful purpose for that time," he said. Mr Bush will have the final say, but Mr Snow did nothing to discourage speculation that some decision may be taken during this week's Presidential visit to Britain, which has been among the most vocal critics of the tariffs.

His remarks follow those of Robert Zoellick, the US trade representative, who claimed that over the past 20 months the US steel sector had grown stronger and more competitive - implying that the measure had done its work.

Nor has Mr Zoellick yet asked the US International Trade Commission to review the WTO verdict, an omission taken by many observers as a sign the administration is leaning towards lifting the duties entirely.

In defiance of Mr Bush's own professed faith in free trade, the White House brought in the tariffs for mainly political reasons: to appeal to workers in rust-belt, steel-producing states such as Pennsylvania and Michigan which he narrowly failed to carry at the last election, and which are now prime targets in his 2004 campaign.

But Mr Bush's options narrowed sharply last week when the WTO issued a final ruling against the tariffs, and the European Union threatened to retaliate against $2.2bn (£1.3bn) of US goods by mid-December if they were not dropped.

The key now, however, is whether an administration loath to bow to foreign pressure on any issue, can present the scrapping of the steel duties as a move dictated solely by domestic economic developments.

Mr Snow and Mr Zoellick appeared to be pointing in that direction. Mr Bush, moreover, received important political cover from Charles Grassley, the Iowa Republican who chairs the influential Senate Finance Committee.

In a letter to the White House, Mr Grassley argued that the removal of the sanctions would speed recovery of the US manufacturing sector. Such a move was justified by "changed economic circumstances" - a reference to the clear recovery in the US economy, and signs of a turnaround in the jobs market.

Third-quarter US gross domestic product grew a blistering 7.2 per cent, while October's unemployment figures showed that the economy is again creating jobs, and that the decline in manufacturing employment has virtually ceased. Economists argue that the tariffs may have cost at least as many jobs in other sectors by driving up the price of domestic steel.