Faced with almost certain retaliation worth billions of US dollars from the European Union (EU), Japan and Norway among others, on 4 December 2003 President George W. Bush announced that he had decided to scrap the tariffs imposed on foreign steel products under Section 201 of the US Trade Act of 1974. In a statement, Bush said, "These safeguard measures have now achieved their purpose, and as a result of changed economic circumstances, it is time to lift them". EU Trade Commissioner Pascal Lamy welcomed the US decision saying, "I am pleased to see that after nearly two years of litigation, the US has decided to abide by their international obligations by lifting the illegal safeguards. EU steel producers and workers will be relieved, as will those in the seven other countries which stood together with the EU in contesting these measures".
Last month the World Trade Organisation (WTO) Appellate Body released its report affirming an earlier determination by the WTO Dispute Settlement Body (DSB) that the US Section 201 steel tariffs violate world trade rules. The EU had said that it would impose retaliatory duties on US$2.2 billion worth of politically sensitive US goods if the safeguard remained in place after a final confirmation of the WTO ruling. Specifically, the EU's sanctions were designed to have a political as well as an economic impact, including citrus products from Florida and textile products from North Carolina; ie, states that are expected to play an important role in next year's US presidential election.
The White House had imposed the three-year safeguards in March 2002, levying tariffs ranging from 8% to 30% on various steel imports. By imposing the safeguards, Bush followed through on promises made to West Virginian steel workers during the 2000 presidential election campaign. However, a debate on whether to repeal or modify the original Section 201 measures had raged for months among Bush administration officials.
The administration contends that the safeguards have already helped the American steel industry to restructure. In all probability the tariffs have cost more jobs in the steel consuming industries than they have saved in the steel industry, but the White House's decision to scrap the tariffs 16 months ahead of schedule risks a political backlash in "rust belt" battleground states in next year's presidential election. Bush stressed that he will keep in place an "early warning system" to license and monitor steel imports so that the administration is able to quickly respond to future import surges. US steelmakers have urged the White House to make the system permanent.
