Anger as US snubs steel imports

BRITAIN'S special relationship with America was rocked last night when President George W Bush imposed crippling tariffs on steel imports. A last-ditch appeal for a rethink from Tony Blair was brushed aside in Bush's controversial drive to protect the US steel industry.

The President's decision has also rekindled the 'cash for favours' controversy involving wealthy Labour donor Lakshmi Mittal. His US steel operation has spent more than £400,000 lobbying the US government to impose high tariffs on imports, a campaign which jeopardises British jobs.

Mittal hit the headlines when it emerged that he gave Labour £125,000 only weeks before Blair wrote a letter to the Romanian leader backing his bid to buy a steelworks.

The tariffs - starting on 20 March and ranging from 8 to 30% - could sound the death knell for Britain's £250m-a-year steel export business with the US There were also fears that they could prompt a damaging-transatlantic trade war after the EU warned it is ready to retaliate with its own tariffs.

Trade Secretary Patricia Hewitt said the American import taxes were 'wholly unjustified'. She made it clear that Britain will support EU moves to hit back.

'Of course we have got to take action now,' said Hewitt. 'We are going to stand by our steel producers. We will not stand by and simply let (the Americans) dump their problems on us. We will oppose this just as hard as we can.'

CBI director general Digby Jones warned that British jobs in steel and manufacturing were at risk. 'The US should be setting an example to the world about what free trade really means,' he said. 'It means global free trade, not American free trade.'

The Bush administration said it is exempting Canada, Mexico and a number of developing countries. The President insisted: 'This relief will help steelworkers, communities that depend upon steel and the steel industry to adjust without harming our economy.'

Terrence Straub, vice-president of US Steel, said the tariffs were 'modest at best'.

Downing Street made it clear that Blair had expressed concerns about the tariff plans. The Prime Minister's official spokesman said: 'We recognise the US steel industry has to restructure, but we do not believe it is in the interests of the world economy that it should impose tariffs. We have gone through the painful process of restructuring in this country, unfortunately the United States has not yet done that.'

Downing Street said Blair had written to Bush last week warning him that tariffs would damage the global economy. They also discussed the issue during a telephone conversation. European Commission president Romano Prodi also warned Bush against taxing imports.

'If the US administration takes measures against imports, particularly if it imposes tariffs on imports, the European Union will have no choice but to react,' said Prodi's spokesman. The European Union said it will file a complaint to the World Trade Organisation for a 'clear violation' of its rules.

'The US decision to go down the route of protectionism is a major setback for the world trading system,' said EU Trade Commissioner Pascal Lamy. 'We will take whatever measures are necessary to safeguard our own market.'