Victory for EU as Bush abandons steel tariffs

The Bush administration lifted its 20-month-old tariffs on steel imports yesterday, bowing to international pressure and the threat of a global trade war. The tariffs were ruled illegal last month by the World Trade Organisation.

The White House presented the decision in purely domestic terms as reflecting the current recovery of the US economy, which rendered the tariffs - initially supposed to run for three years - unnecessary.

Officials insist the tariffs, of up to 30 per cent on some items, had protected the troubled troubled domestic steel sector as it reorganised. The President, George Bush, said in a statement: "These safeguard measures have now achieved their purpose, and as a result of changed economic circumstances, it is time to lift them."

Foreign reaction was one of deep satisfaction. Digby Jones, head of the CBI, said businesses on both sides of the Atlantic would "breathe a huge sigh of relief at the climbdown".

Robert Zoellick, the US Trade Representative, claimed the industry's general situation had improved greatly since Mr Bush imposed the tariffs. Sales of domestic steel and company profits were sharply up.

In reality, however, the White House found itself staring down the barrel of an international trade war, as European and Asian countries threatened punitive action unless the tariffs were removed in their entirety by the WTO deadline of 15 December. Mr Bush has now complied, despite pressure from the steel industry that at least some tariffs be maintained.

In an attempt to soften the blow for domestic steel makers, the Commerce Department announced it would step up its monitoring of steel imports. The administration is also pledging to work for an elusive global agreement limiting national subsidies to the steel industry and to curb over-capacity.

But industry sources said both steps are little more than a fig-leaf.

Yesterday's move was recognition that the tariffs were an embarrassment for an administration that never misses a chance to extol the virtues of free trade and the WTO, or to urge poorer countries to open up their markets to imports.

Charges of US hypocrisy on steel and farm subsidies contributed to the collapse of September's WTO talks in Cancun, Mexico, which had been intended to breathe new life into negotiations for a new global trade round.

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