The EU is the place to fight Mr Bush's new steel tariffs

'There is little to rejoice about in steel jobs going to the wall, whether in the US or anywhere else'
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President Bush's decision to impose new steel tariffs is rich in what Marxists used to call contradictions. Of these, the fact that a donor to the British Labour Party lobbied the US government to do what it has done is frankly the least of it. It isn't just that George Bush, if there was any justice, would become a hero among those who took to the streets in Seattle and Genoa, for taking a firm, if bitterly controversial, stand against globalisation. Or that, since one of the factors stopping essential mergers in the US steel industry is the huge liability the companies have incurred by agreeing generous healthcare packages with their unions, a free and universal health service like the NHS emerges, by contrast, as a lubricant of the free market rather than an obstacle to it.

It's also the spectacle of the European social democratic left making common cause with the hardline, free-market Reaganite American right, from the editorialists of The Wall Street Journal to the Heritage Foundation, against a US Republican President's violation of the principles of free trade.

But then this is one of those defining moments, and not just because it will reverberate through US-EU relations at a time when they are already under severe strain. Before jumping up and down with undisguised schadenfreude at the President's worst decision since taking office – that of protecting the US steel industry against market forces – let's remember that there is little as such to rejoice about in steel jobs going to the wall, whether in the US or anywhere else. From Bob Dylan's "North Country Blues" to Bruce Springsteen's "My Hometown" and Chris Rea's lament "Steel River", the best of Anglo-American popular culture has chronicled the contraction – rationalisation is the euphemism of choice – of manufacturing jobs. The reason it did so is because the disappearance of those jobs has been – and continues to be – deeply, sometimes dehumanisingly, painful.

Yet, oddly, it was the wonderfully optimistic The Full Monty, a British film which did incredible business in the US, and was set in Sheffield, a steel capital which isn't one any longer, that best expressed the human capacity to adapt to such change.

And that was an idea we thought– justly – we had learnt above all from the hugely labour-mobile US, which frequently derided the supposedly welfare-ridden, sclerotic Europeans for clinging too long to their smokestack industries after their time had come. There will be a protracted technical row over whether the US is entitled under World Trade Organisation rules to do what it is doing. And the betting in Brussels is that it isn't. But even if it were, it has sent out a clearly and unexpectedly negative message about its commitment to free trade. Eventually this row will end. But until then what potentially, even if unfairly, threatens the US's intellectual hegemony almost as much is what it says about the President's commitment to the free market system that has made the American economy such a staggering success.

The other lesson has to do with Europe, and Britain's place in it. It may be understandable that Iain Duncan Smith should have majored in the Commons yesterday on the irony of Lakshmi Mittal's having lobbied for US protectionism. And that the Government should have hit back with the not particularly gallant accusation that Corus's US subsidiary failed to leave the principal US steel lobbying organisation when it started to campaign for tariffs. And that Tony Blair's critics, including some on the left, should be so eager to point out that the Bush decision has brutally exposed the limits of the Prime Minister's influence on the White House. But actually none of this has very much, if anything, to do with the real world.

I'm told, for what it's worth, by Labour MPs with a steel interest, that Patricia Hewitt and the trade minister Baroness Symons have been assiduous in making the case against protectionism to their American counterparts over the last year.

But there is only so much that they, or Tony Blair, could have done. For what is clear is that only the EU, acting collectively, has the clout to represent the interests of its member states on an issue as big as this. We should be grateful that in Pascal Lamy there is an EU Trade Commissioner who has vision and ability. But even if he didn't, there would still be zero chance of individual European countries, including the UK, of competing alone against the heavy domestic pressures which have led the US President, in open defiance of much of his own ideological base, to take this hugely damaging decision.

One of the reasons that it is so damaging – including, in the end, to American interests is that it now threatens to trigger a trade war at just the moment when Lamy and the US Trade Secretary, Bob Zoellick, seemed to be reaching an accommodation on many of the outstanding issues between the two trading blocs. Bananas had been sorted. So had a dispute over the "hush kits" the European Union has been demanding to subdue aircraft noise. It also looked as if the European complaints about tax breaks for US foreign sales corporations –worth up to $4bn (£2.8bn) was going to be resolved without too many casualties in the US even if, as seems certain, the World Trade Organisation will next month rule that the EU has a case for massive retaliation.

Thanks to steel, and with elections coming up in both France and Germany, the political pressures on Lamy to take that retaliatory action – the consequences of which are much bigger than those of steel on its own – become pretty well irresistible. The point however is that this weapon, or if by any chance the President can be persuaded to change his mind, the threat of it, can only be deployed by a bloc as big as the European Union.

If Britain tried to act alone in this way, its commercial interests would simply be flattened in the process. There is a real lesson here, not least for those Conservatives who covertly and not so covertly are prepared to contemplate withdrawal from the EU and cling to the romantic and wholly obsolete fiction that Britain could manage its relations, including those with the US, without the help of the rest of Europe.

For Tony Blair too, this is a defining moment for his relations with George W Bush, though perhaps not in the way some of his critics think. In an important sense it is an opportunity. It doesn't at all mean that he has to agree with his European counterparts' criticisms of the US on global security. Or that, in terms of defence, the Prime Minister is anything but right to foster Britain's oldest and most important alliance.

But when the President took office the smart people at Downing Street argued strongly that the Bush stance in favour of free trade was one of the best things about him. By registering with full vigour his anger at a decision which is deeply mistaken by the President's own lights, he has the chance to demonstrate conclusively that his loyalty to Washington has limits. In the process, he makes his support for the US on other issues all the more credible.