Blair hopes to end EU-US trade war in Bush meeting

Tony Blair is optimistic that the long-running trade war between Europe and the United States, which threatens hundreds of British jobs, can be resolved during President George Bush's visit. The Prime Minister would hail such a deal as evidence that the leaders' special relationship can provide tangible domestic benefits.

The turmoil in Iraq will inevitably dominate next week's talks, but time has been set aside to discuss the crisis triggered by the US decision last year to impose tariffs of up to 30 per cent on steel imports.

They have been ruled illegal by the World Trade Organisation, which has given President Bush until 15 December to scrap the duties. If he refuses, the EU threatens to impose sanctions of £1.3bn on US goods. Asked this week whether he would he lift the tariff, Mr Bush said: "I am listening, looking and we'll decide at the appropriate time." Any deal would be formally announced in America, but British officials are confident the President will hint at it next week.

In a further demonstration of co-operation, Gordon Brown, the Chancellor, and John Snow, the US Treasury Secretary, will sign an economic deal loosening some Anglo-American trade barriers.

Plans for "entrepreneur scholarships", to allow young people from deprived areas of Britain to attend US business schools, and better links business links between the two nations' universities will also be unveiled on Tuesday.

Mr Brown and Mr Snow will also take the "enterprise express" from London to the Confederation of British Industry conference in Birmingham. Other passengers will include Sir Richard Branson and Stelios Haji-Ioannou, the founder of budget airline easyJet. But there is less optimism that Mr Bush and Mr Blair can resolve the problem of the nine British prisoners at Guantanamo Bay.

America has agreed to suspend legal action against them while officials discussed concerns about planned military tribunals, such as their right of appeal and their lack of choice of legal representation. Mr Blair has said the inmates must either face a proper trial or be returned home and said he expected to resolve the issue "quickly".

But the chances of the two leaders settling the legally complex situation during their face-to-face session are fading fast. Most likely is a joint statement saying they hope to reach agreement "soon".

Top of the agenda will be the fragile political and security situation in Iraq. The leaders are bound to discuss plans to speed the establishment of an Iraqi government, possibly as soon as early next year, and military tactics for suppressing terrorist activities. Also on the agenda will be moves to rebuild the country.

In private, the leaders will strike different notes on the perceived threat from Iran's nuclear ambitions. Although the President has thanked Jack Straw, the Foreign Secretary, for travelling with his French and German counterparts to Tehran, the White House suspects that the Iranians are attempting to play Europe off against the United States.

The Prime Minister is likely to reassure Mr Bush that the vision promoted by Britain, France and Germany of a joint European defence force would not undermine the effectiveness of Nato alliance.

The President has said he trusts "Tony" on the subject, and European governments will be looking to Mr Bush to make conciliatory noises on the issue in his keynote speech on Wednesday.