And the triumph may provide the extra impetus needed to relaunch the latest round of talks aimed at further freeing global trade, diplomats said Friday.

"It shows that the WTO dispute settlement machinery works and I think that it is a very welcome and positive sign," said Australia's ambassador to the WTO, David Spencer.

"I think it will improve the prospects of continuing with our Doha negotiations," he told AFP, referring to the Doha Development Agenda that stalled in Cancun, Mexico three months ago amid deep divisions between rich and poor nations.

"It takes away this threat of a retaliatory war, which Europe and Japan were threatening ... It just generally improves the atmosphere," said Spencer.

Facing a threat of some 2.2 billion dollars in retaliatory sanctions from the European Union and the prospect of similar moves by seven other trading partners including Japan and China, President George W. Bush on Thursday scrapped three-year tariffs on certain steel imports imposed in March 2002.

The safeguard measures, ultimately ruled illegal by the WTO last month, were ordered to allow a failing US steel industry time to re-structure, according to Washington.

"This proves the WTO has teeth," said Jean-Pierre Lehmann, director of the Evian Group, a trade-related think-tank in Switzerland.

It challenged the notion held by anti-globalisation protestors that the orgnisation is under US influence, he said.

"Bush's decision to impose the tariffs violated the multilateral trading system at a time when member states were trying to conclude the Doha round of negotiations," said Lehmann.

"It is a good thing the WTO successfully exercised discipline."

EU Trade Commissioner Pascal Lamy said Washington's compliance -- which had been in doubt -- vindicated the WTO's rules-based format.