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. Last Updated: 07/27/2016

Bush's Retreat On Steel Is WTO Victory

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George W. Bush, whose distaste for multilateral organizations is legendary, has met his match. His reluctant decision last week to rescind steel tariffs, though hardly a glorious moment for the U.S. president, is a triumph for the WTO and the rule of international law.

By finding the tariffs illegal, the WTO handed the EU a powerful weapon in the form of $2.2 billion of threatened trade sanctions and strengthened U.S. steel users' case against the duties. Retaliation is a far from ideal instrument for righting wrongs in trade disputes: It is a gun that is best never fired. This time, fortunately, it did not need to be.

Bush has put a different gloss on his decision, claiming the tariffs had done their job by enabling the U.S. industry to consolidate. However, as Gary Hufbauer of the Washington-based Institute for International Economics has noted, that assertion is based on no evidence. In any case, consolidation has much further to go.

But relief at Bush's decision should be tempered by caution. For one thing, his administration is considering changes to anti-dumping rules that would erect new barriers to steel and other imports by the back door. If it puts them into effect, it will forfeit any credit earned by ending the tariffs and create new trade tensions. Furthermore, popular anxieties about the loss of highly paid U.S. jobs in manufacturing, services and other sectors are fuelling political pressures for further protectionist measures. These are most evident in the clamor in Congress for restrictions on imports from China, in response to the growing imbalance in bilateral trade.

So far, Bush's administration has managed to contain those demands. But that may become harder as next year's presidential election draws closer, particularly if the U.S. economic recovery falters or fails to generate enough high-quality jobs.

The United States also has yet to comply with a string of other WTO rulings against it. Unlike steel, most cannot be implemented by presidential fiat but require legislative changes. In some cases, Congress appears reluctant to act. In the case of the Foreign Sales Corporations scheme, a business tax break ruled illegal by the WTO, it accepts the need to comply but is having difficulty doing so because of internal disagreements over broader tax reform policy.

The EU has raised the stakes by threatening $4 billion in sanctions if the scheme is not repealed by March 1. Until now, EU pressure has been positive, serving to concentrate minds in Congress. But setting a firm deadline less than three months away is a high-risk tactic that could easily backfire.

Triumphalism over steel tariffs must not lead the EU to push brinkmanship too far. Equally, the United States must limit that risk by showing unequivocally that it is committed to resisting protectionism and abiding by multilateral rules. Until it does so, any truce over trade will remain fragile.

This comment appeared as an editorial in the Financial Times.