Squaring up: UK vs US?

Downing Street has signalled that Britain is set to invoke World Trade Organisation rules to erect trade barriers in response to George W Bush's decision to impose tariffs of up to 30 per cent on steel imports into the US.

Number 10 said Britain would put in place safeguard measures to prevent damage to the UK economy following president Bush's "unjustified" decision.

"There are within WTO rules safeguards which can allow a country or a group of countries like the EU to safeguard their market from the impact of a decision by another WTO member who has breached the rules," said a spokesman for the prime minister.

The British government, which is backing an EU-led complaint to the World Trade Organisation, says the tariffs will damage the world economy and hit US consumers.

EU opposition

The EU's trade commissioner, Pascal Lamy, says the decision breaches international trade laws - a claim rejected by president Bush.

Lamy has hinted that the EU may embark on a tit-for-tat response but stressed the action would remain within WTO rules. It is expected that the EU will draw up a list of US exports which will face steep tariffs as a direct response to Bush's decisions.

"This is not the Wild West where everybody does what they like," he told reporters. "We will respect trade rules."

Bush insists that the tariffs, which range between eight per cent and 30 per cent, are not in contravention of trade regulations.

He says they will help steelworkers, communities that depend upon steel and the steel industry without harming the US economy.

His decision is likely to test the "shoulder to shoulder" alliance forged by Tony Blair and Bush in the aftermath of September 11 - although Number 10 says it will not be allowed to sour relations.

"The strength of our relationship is not that you can agree on every issue, but that you can handle issues like this," said a Number 10 spokesman.

Protectionism

Britain has warned that the decision could have serious consequences for jobs and could result in a damaging trade war.

The trade secretary, Patricia Hewitt, described the introduction of the levy as "wholly unjustified" and vowed to fight it.

"We are already in touch with our European colleagues to ensure that we launch an immediate complaint to the WTO and take appropriate action to safeguard British steelworkers against a flood of steel imports," she said.

Bill Morris of the TGWU said President's Bush's decision was "blatant protectionism".

Ruth Lea, head of the policy unit at the Institute of Directors, told ePolitix.com: "We are very disappointed by the US's decision to impose these tariffs. Steel protection should be scrapped, it is old fashioned protectionism.

"This will be yet another blow for Corus and could well spark a new international trade dispute."

The industry response

Corus chief executive Tony Pedder called on the UK and Dutch governments as well as the European Commission to take "immediate decisive action to respond with equal measures".

"EU and government officials have had several months to prepare their responses since the US announced its intentions. They should not hide behind procedural niceties or technicalities. We need action now," he said.

Speaking yesterday, Number 10 said the prime minister was fervently opposed to the introduction of tariffs.

"The prime minister has made his view clear both in a letter to President Bush and in last week's phone call," said a Downing Street spokesman. "We recognise that the US steel industry does have to restructure, but we do not believe it is in the interests of the world economy that it should impose tariffs.

The EU has been joined by countries including Japan, Russia, Brazil, Australia and South Korea in opposing the tariffs.