Bush backs down on steel tariffs

Published on Friday 5 December 2003 00:00

PRESIDENT George Bush last night avoided a major trade war as he bowed to international pressure and lifted the controversial tariffs on steel imports to the United States.

The climbdown was welcomed by the European Union, which was on the verge of imposing retaliatory tariffs on a range of US exports.

British firms have lost thousands of tonnes in trade since the steel tariffs were imposed last year, ahead of the mid-term Congressional elections.

Their imposition was designed to shore up support in the Republican heartlands of West Virginia, Ohio, Pennsylvania and Michigan, but the move backfired amid complaints from US car manufacturers who said it had driven up prices.

Following an official complaint by the European Union that the levies contravened free-trade regulations, the World Trade Organisation ruled in October that the EU could impose compensatory tariffs on US exports.

The EU raised the stakes by announcing it would target goods from the politically sensitive states of Florida, California, Wisconsin and Tennessee when the tit-for-tat sanctions came into force in two weeks’ time. Japan and South Korea had also said they were considering retaliation.

In a statement, Mr Bush said the tariffs had achieved their objective of allowing the US steel industry to modernise and protect jobs.

"These safeguard measures have now achieved their purpose, and as a result of changed economic circumstances, it is time to lift them," he said.

The retreat will be seen as a victory for Tony Blair, who used Mr Bush’s state visit to Britain last month to lobby for the tariffs to be lifted.

However, there was concern at the "small print" in the president’s announcement. In a face-saving exercise to appease steel workers in Republican heartlands, Mr Bush promised all imports would continue to be "monitored" to protect the domestic market.

Patricia Hewitt, the Trade and Industry Secretary, said Mr Blair had been enormously influential in securing a resolution.

"We took this issue up ... because we owed it to the steel industry and 20,000 people who work in it. After years of painful restructuring, nothing would have been more unjust than further job losses because of unfair protectionism."

The move will hearten Mr Bush’s opponents in the US ahead of next year’s presidential elections. Mr Bush had originally intended the tariffs to run until 2005 and will face accusations he acted opportunistically rather than in the interests of the US economy.

Pascal Lamy, the EU’s Trade Commissioner, said the EU industry had lost about 15 per cent of its annual two billion euros (2.4 billion) steel exports to the United States, despite negotiating exemptions for some European products in return for delaying retaliation. He said: "This is obviously good news for European steel, good news for European steelmakers, good news for European steelworkers. It’s good news for Europe," he said.

Digby Jones, the director general of the Confederation of British Industry, said British and American firms would welcome the news that the US government had "come to its senses".

He added: "US steel producers may have seen some short-term benefit, but US steel users paid the price, in jobs and loss of competitiveness."