The World Trade Organization has ruled that U.S. tariffs on imported steel are illegal, setting the stage for a showdown with the international body and U.S. trade partners. The ruling, which was widely anticipated, provides U.S. President George W. Bush with an opportunity to signal his commitment to free and fair trade. It gives the administration cover to end a program that was politically expedient but has stained U.S. trade credentials and threatens to set off a trade war. Electoral politics may yet prevail, however, and the world must be prepared for a serious trade fight and yet more damage to the international trade order.

A WTO panel ruled last week that the United States broke international trade rules in March 2002 when it imposed tariffs of up to 30 percent on imported steel. The administration argued that tariffs were put in place to provide breathing space for domestic steel producers, whose survival was threatened by cheap imported steel. During the three years the tariffs were in place, U.S. producers were supposed to restructure to become more competitive.

Most observers saw politics at work behind the scenes. The decision to impose protection safeguarded jobs in Ohio and Pennsylvania, two electoral districts that are critical to the president's prospects in the 2004 election. The actual economic damage done by imports was challenged, especially since many of the imports had been decreasing.