Bush, Europeans working to defuse trade tensions

WASHINGTON -- President Bush and European leaders on Thursday tried to defuse tensions that are threatening to spark a full-blown trade war but reported no breakthrough on the most contentious issue -- new American tariffs on steel.

Bush and the European leaders pledged to abide by World Trade Organization rules in working out their differences over the up to 30 percent border tax that the United States imposed on certain steel imports last month in an effort to protect the beleaguered U.S. steel industry.

"We have agreed that discussions should continue without any prejudice to our respective rights under WTO," European Commission President Romano Prodi told reporters at a joint White House news conference.

However, EU officials said they were not willing to back away from their threats to impose their own punitive tariffs on $355 million in U.S. exports, ranging from citrus to textiles and steel, if the United States does not relent and offer some type of compensation for its own higher steel tariffs.

Prodi said that the U.S. steel tariffs, which the administration imposed for three years to give the domestic industry time to become more competitive, "are certainly harming us." Other EU officials said they had to maintain a threat to impose retaliatory tariffs beginning next month to preserve their rights under WTO rules.

The threatened tit-for-tat trade war over steel was just one of a number of trade disputes Bush and the EU leaders covered during their once-a-year summit meeting.