PARIS (AFP) - The Organization for Economic Cooperation and Development described a U.S. decision to scrap steel tariffs as a boost to its negotiations to reduce trade-distorting steel subsidies.

"This a welcome development that will provide further impetus to the negotiations," OECD Deputy Secretary General Herwig Schlogl said in a statement. "The lifting of the steel safeguard measures improves the climate in international steel trade and helps to rebuild trust into the multilateral system."

Facing a threat of some $2.2 billion in retaliatory sanctions from the European Union, President George W. Bush on Thursday scrapped three-year tariffs on certain grades of foreign steel imposed in March 2002.

The tariffs, ultimately ruled illegal by the World Trade Organization, were ordered to allow a failing US steel industry time to re-structure, according to Washington.

The OECD initiated negotiations among all major steel-producing nations aimed at strengthening disciplines on government assistance to the steel industry.

Participants in December 2002 agreed to focus specifically on working out an agreement on steel subsidies.

Meanwhile, Asia-Pacific countries hailed U.S. President George W. Bush's decision to end illegal tariffs on steel imports as a vindication for fair trade rules.

Japan led the chorus of cheers saying it was pleased with the decision but cautioned it would keep a close watch on U.S. monitoring of steel imports, which it warned could be used to protect the U.S. steel sector.

New Zealand said the U.S. decision to abandon the tariffs was a victory for New Zealand and the World Trade Organization while South Korea said it would help to facilitate free trade.

The U.S. decision came in response to a successful challenge through the WTO dispute settlement system by eight countries including Japan, New Zealand, South Korea and China.

Bush announced Thursday he would rescind the tariffs. He had had little choice after the WTO ruled last month that they were illegal and major trading partners vowed massive retaliation. An official at the steel division of Japan's Ministry of Economy, Trade and Industry said: "We do not consider this monitoring system a protectionist measure but will keep a close watch on it to prevent it from being used to protect the domestic industry."

The official also noted the U.S. safeguards had prompted other nations to impose similar special tariffs on steel imports.

"We hope those countries ... namely China ... will scrap the trade barriers," he said.

China, for its part, made no comment Friday on the U.S. change of heart, although it applauded the WTO ruling last month that U.S. steel tariffs violated global trading rules. CAPTION

Coiled steel from Holland is unloaded from a ship at the Port of Cleveland.