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Last Updated: Thursday, 4 December, 2003, 23:52 GMT
Bush ditches steel import duties
Protests in Pittsburgh against a possible tariff repeal
Steelworkers wanted the tariffs to be kept
President George W Bush has repealed US tariffs on imported steel to avoid a damaging trade war.

The decision follows a World Trade Organisation decision that the duties, imposed in March 2002, are illegal.

Mr Bush had justified them by saying foreign steel firms were driving US firms out of business with unfair competition and government subsidies.

The European Union announced that its sanctions, to be imposed against the US and worth $2.2bn, will be dropped.

Purpose achieved

"These safeguard measures have now achieved their purpose and, as a result of changed economic circumstances, it is time to lift them," said White House spokesman Scott McClellan in a statement read on behalf of Mr Bush.

US President George W Bush

"US steel jobs have been given another chance to compete," he said.

US Trade Representative Robert Zoellick said the tariff decision had been made independently of the EU retaliation threat.

At no stage did the US administration admit it had acted illegally in breaching WTO rules.

The EU had carefully drawn up a list of products to target, which are produced in states expected to be the key battlegrounds in the November 2004 presidential election, such as citrus fruit from Florida.

'Good news'

After hearing the tariffs were being dropped, Pascal Lamy, EU Trade Minister, said: "This is good news for us. The fact that the US steel industry has started to restructure is good news for the future.

"The important thing is that this sort of thing should not happen again."

He said the decision showed what the EU could do when it acted together and "confirmed its weight".

The president's complete lack of mettle in calling the WTO's bluff ignores the continuing damage being done
Leo Gerard, President of the USWA steelworkers' union

Referring to the proposed EU counter-sanctions, he said: "We did not just refer the matter to the WTO, we also took some measures of our own on a precautionary basis."

Mr Lamy said he would now be asking the European Commission on Friday to drop the EU's proposed protectionary measures.

UK Trade Secretary Patricia Hewitt said she was "delighted" a possible trade war with Europe has been averted.

Speaking on BBC's Newsnight programme Trade Minister Mike O'Brien said: "This is a victory for common sense. One factor was no doubt the lobbying from the UK, and from Pascal Lamy."

And European steel lobby Eurofer welcomed the end to the steel import duties.

"This is an excellent thing. We are glad that the president has decided to respect the rules of the World Trade Organisation," said Christian Mari, director of Eurofer, the European steel lobby.

Political decision

But Ian Rodgers, director of UK Steel, a trade body for British steel manufacturers, told BBC News Online: "We give this news a cautiously optimistic welcome.

"We are delighted he has removed the tariffs but we are a bit wary about the announcement that there is to be a licencing system in place to deal with any further surge.

"We are worried that when the small print starts coming out in the next few days there will be a nasty surprise or two.

"His decision to impose tariffs initially was done completely with an eye on his domestic political situation.

"However with the threat of EU tariffs, which I think has been an important factor here, Mr Bush has obviously decided he cannot afford to lose the state of Florida in the forthcoming elections."

CBI director general Digby Jones said businesses on both sides of the Atlantic would welcome the news that the US government had "come to its senses".

Steelworkers' backlash

Mr Bush had been widely criticised during the steel controversy for putting politics ahead of his professed belief in fair trade.

The tariffs were originally imposed to satisfy an election pledge Mr Bush made to steel bosses and workers.

He may now face a backlash from those workers who said he promised to keep the tariffs in place for three years.

On Thursday the largest US steelworkers' union, the United Steelworkers of America (USWA) said the administration had caved in to "European blackmail," and had betrayed workers and steel communities - many of which are in crucial election battleground states.

Car manufacturers

President of the USWA, Leo Gerard, said: "The president's complete lack of mettle in calling the WTO's bluff ignores the continuing damage being done."

Mr Bush has had to balance these complaints with those of steel users such as car makers, which have complained that tariffs have made their life more difficult by driving up prices.

Ahead of the decision, Mr Bush said it would be based upon his "strong belief that America's consumers, the American economy, is better off with a world that trades freely and a world that trades fairly".

But, in the run-up to the repeal, some commentators suggested that the tariffs were being removed because they were now doing Mr Bush more political harm than good.

Examining the tariffs decision, Charles Grant, of think tank Centre For European Reform, said: "I think it was a combination of internal domestic pressures plus the threat of sanctions, plus the fact that Mr Bush is keen to win allies around the world."

The BBC's Evan Davis
"The steel industry and its workers don't like the climbdown"

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