Bush steel tariff dashes NZ hopes of deal on free trade

By VERNON SMALL and AGENCIES

New Zealand's hopes of a quick start to free-trade talks with the United States have been set back after President George W. Bush opened the door to a trade war by imposing tariffs on steel imports.

When Prime Minister Helen Clark met Mr Bush briefly at the Apec summit in Shanghai last October, she appeared optimistic about making progress on a free-trade deal with Washington, saying New Zealand wanted to be the "first cab off the rank".

But she is now lowering her expectations.

"The signals would be that with congressional elections this year, it isn't the year for any fresh talks to be started by the US Administration," she said.

The decision to impose steel tariffs comes less than three weeks before Helen Clark goes to Washington, where she will discuss free trade and terrorism with Mr Bush.

"It is not going to be easy getting an open-trade agreement with the US," she said yesterday.

"There are very strong protectionist interests in the United States. If those interests are prepared to take on the EU and Japan, then New Zealand, Australia, Chile and Singapore ... we are small beans."

There could be a "window" next year if the US economy was going well and the Bush Administration was feeling more secure.

Helen Clark said she would tell Mr Bush that New Zealand was "ready when they are" to begin talks on free trade.

World steel makers, led by the European Union, have vowed to fight the steel tariffs.

"The world steel market is not the Wild West where everyone can do as he pleases," said EU trade commissioner Pascal Lamy as he announced the filing of an immediate formal complaint with the World Trade Organisation.

The EU produces more than 25 per cent of American imports of flat and tin mill products, on which a 30 per cent tariff will be applied from March 20.

It is also worried that steel blocked from entering the United States might then land on its shores.

New Zealand Finance Minister Michael Cullen said the tariff raised questions about how deeply the US was committed to liberalising trade.

The US steel industry, encumbered by high-cost retirement, health and pension benefits, production inefficiencies and overcapacity, has been struggling for years to remain competitive.

More than 30 steel firms have fallen into bankruptcy since 1997.

New Zealand exports $50 million of steel a year - about 15 per cent of the Glenbrook mill's production - to the US.