Backing down in the face of a threatened trade war, US President George Bush yesterday ended 20-month-old tariffs on imported steel that had been ruled illegal by the World Trade Organisation.
Mr Bush declared that his temporary steel tariffs had succeeded in giving the US steel industry enough time to restructure but, in a concession to the steel industry, ordered a system of steel-import licensing to spot any surge of steel imports.
The EU office in Washington said it would closely monitor the new surveillance mechanism to ensure that it is applied in full conformity with WTO rules.
The US faced retaliation in days from its major trading partners over steel tariffs. The EU had warned it would impose duties on $2.2 billion (€1.8 billion) of US exports starting on December 15th, and Japan and South Korea had also threatened retaliation.
By lifting the duties of up to 30 per cent on steel imports 15 months earlier than planned, the Bush administration has avoided 100 per cent EU sanctions on such items as US orange juice, motor cycles, vegetables and cigarettes.
Politics weighed heavily on the decision to end the tariffs, introduced in March 2002 to protect inefficient US steel producers. The steel-producing states of Pennsylvania, West Virginia and Ohio could prove vital to Mr Bush's re-election in 2004, while many crucial swing states produced the exports targeted by the EU.
EU Trade Commissioner Mr Pascal Lamy hailed the decision saying: "When Europe is united and it is united on trade policy, it can play a role on world affairs that corresponds to its weight." Mr Lamy announced in Brussels that the EU sanctions had been a "tool" for compliance. "They've complied and the sanctions will disappear," he said.
"We should now concentrate our efforts on the OECD steel talks to cut down trade distorting subsidies and global excess steel capacity, which is at the root of the problems by the US steel industry."
US trade representative Mr Robert Zoellick said the prospects for US steel had improved since March 2002 with demand rising in China and Russia, and cutbacks in US steel output by four million tons. The benefits to the industry no longer outweighed the "marginal cost" to consumers, he said.
Democratic Congressman Mr Ted Strickland of Ohio accused Mr Bush of buckling to EU pressure.
"The president gave his word we would have three years of relief from illegal imports," he said. "But in the face of pressure from the WTO and the European Union, he walked away from that pledge."
In contrast to his usual practice of personally making major policy announcements, Mr Bush made his decision known in a written statement issued by his press secretary.
He said the "safeguard measures have now achieved their purpose and, as a result of changed economic circumstances, it is time to lift them".
The US would, meantime, continue to push other countries to create "new and strong disciplines on subsidies" to their domestic steel producers.
Mr Bush said steel importers would have to apply for import licences, so that import surges could be monitored and there would be a more aggressive use of US anti-dumping laws if imports surged in future.
