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Last Updated: Friday, 5 December, 2003, 09:21 GMT
Europe praises Bush steel repeal
Rolls of steel
Cheap steel from outside the US was blamed for job losses
Governments and companies in Asia and Europe have welcomed President George W Bush's decision to repeal US tariffs on imported steel.

The move was trumpeted as a victory for free trade and will halt an escalating trade war of tit-for-tat tariffs.

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

Analysts said China, which also has tariffs on other goods, may now be willing to drop retaliatory measures.

Purpose achieved

Both Japan and South Korea said they welcomed the move and hoped that exports would recover in the coming year.

The end of the US sanctions comes after 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.

US President George W Bush

"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.

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

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

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, EU Trade Minister Pascal Lamy 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."

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

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

Cautious approach

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 licensing 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."

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.

Steelworker
Steel workers wanted the tariffs to be kept
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.

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

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."


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



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