Sun, Nov 30, 2003 - Page 11 News List

Bush likely to cave in on steel

EFFECTIVE DELAY Although rolling back the controversial steel tariffs is likely to cost US President George W. Bush some political capital, they are viewed as unsustainable

REUTERS , GENEVA

Speculation mounted on Friday that Washington will scrap or roll back controversial steel tariffs after it sought and obtained an effective delay in retaliatory sanctions by countries opposed to them.

The WTO, which had been due to rubber-stamp the verdict of its highest court that the duties are illegal, has put off the key session for nine days at the request of the US.

The EU, one of a number of trade partners to take action at the WTO over the levies, had warned it was ready to hit Washington with sanctions on up to US$2.2 billion of goods within five days of the WTO approving the court ruling.

With the delay, the countdown to European Union retaliation, which would be the largest ever unleashed in a trade fight, was also put on hold.

"If the delay allows the US time to withdraw the protectionist measures, that is better for everybody," said Fabian Delcros, a spokesman for the European Union in Geneva.

Officially, Washington wanted the delay because it had not been expecting the meeting to take place before Dec. 10, the legal deadline for WTO states to ratify the court decision.

"The president has said he would make a decision in a timely manner and this action will provide additional time, and the ongoing review will continue," said White House spokeswoman Claire Buchan.

But the delay comes amid increasing signs that US President George W. Bush's administration is considering ditching the duties, initially for up to 30 percent, which it imposed last year to help defend the country's struggling steel industry against cheap imports.

Ending the tariffs 16 months ahead of schedule could spark a political backlash against Bush in next year's presidential election in the pivotal steel-producing states of Ohio, Pennsylvania and West Virginia.

But key Bush advisers have concluded the tariffs are causing more harm than good and that lifting them would boost Bush's standing with steel consuming industry, another important constituency, political sources say.

His aides have raised expectations the tariffs could go, saying that they have already served much of their purpose by giving the steel industry time to consolidate operations and become more competitive after a string of bankruptcies.

"The only question is when," said David Phelps, president of the American Institute for International Steel, which represents steel importers.

The EU sanctions, which would hit goods from orange juice to pyjamas, have been carefully chosen to have the maximum political impact in states that could be crucial to the outcome of next November's presidential poll.

Japan, which was initially reluctant to make threats, has also announced plans to retaliate on US$458 million worth of US products ranging from coal to textiles.

Norway, too, has drawn up its battle plan, while Brazil, China, New Zealand, South Korea and Switzerland -- the other countries to challenge the US over steel at the WTO -- are reported to be weighing their response.

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