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Steel yourself: UK trade policy is suffering post-Brexit drift

The UK is having a hugely confusing debate about the steel industry and following rules.

This is partly because, in the moral quagmire of Downing Street, it was steel tariffs that allegedly caused the resignation of Boris Johnson’s ethics adviser Lord Christopher Geidt. He has since said that this was just one example of wider disregard for international law.

And that’s partly because the government’s approach to both trade and the steel industry is being challenged for political reasons.

To sum it up, after the Trump administration imposed 25 percent tariffs on steel in 2018, the EU took steps to prevent metal that the US had shut out from flooding into Europe. After Brexit, a new body – the Trade Remedies Authority – was tasked with reviewing those safeguards to make sure they were suitable for the free-trading, free-trade-loving Global Britain.

The TRA was established as an independent entity that makes fact-based decisions. In other words, it was designed to be as separate as possible from political interference. This lasted until it produced a finding that the government did not like very much.

When the agency proposed last year to remove nine of the 19 guarantees on steel products, the government took back control of the process and passed emergency legislation to temporarily extend five of those measures, while four expired. It then asked the TRA to rerun its analysis and reconsider the work on a new, broader basis.

Anyone trying to read the result of 271 pages, released last week, would have some sympathy for Geidt if he went to the door. But, noted Sam Lowe, director of trade policy at Flint Global, the TRA actually supported the methodology and results of the original analysis. But with different questions come different answers: It said the government’s new directions did indeed yield results that justify maintaining tariffs.

The only thing inherently more political than trade policy is steelmaking, especially for a government elected with a promise to level the areas that do it. Still, the disintegration of the post-Brexit pledge to lower trade barriers has been swift and final – and it means staying more aligned with the EU than the original analysis (which the steel sector claims was flawed) deserves .

Whether or not this is a violation of World Trade Organization rules is not at all clear – and it won’t be unless someone takes a lengthy lawsuit and wins. Turkey has already unsuccessfully challenged EU guarantees. But it’s useless, to say the least, to have mid-way through your rigorous process of analysis and decision-making to get a different answer.

Boris Johnson’s comments when asked about tariff plans (including: a related problem on reassessing the exemptions being offered to developing countries) have further clouded matters. The industry, he said, needed “much cheaper energy and cheap electricity” and “until we can fix that”, British steelmakers should be given the same protection as other European countries.

These are two separate matters. The steel industry has been complaining, with some justification, about high electricity prices in the UK compared to France and Germany for years. The difference, with UK prices at £35 per MWh – or 60 per cent – higher than Germany’s The latest figures from UK Steelis traditionally due to domestic policies and network costs, according to the trade organization.

The government has long resisted this kind of intervention and has taken action recently: it has increased the exemption from carbon pricing for heavy energy consumers, which are currently worth a few pounds per megawatt hour, and pledged to review network costs. The sector really likes that. But it falls short, argues David Bailey of the University of Birmingham, on the kind of comprehensive industrial policy needed to boost investment and decarbonise the industry.

What it isn’t doing is justifying tariffs to protect the steel sector as the UK tries to get its domestic policies in order. No wonder everyone is confused.

Helen.thomas@ft.com
@helentbiz

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