Government’s plan to extend steel tariffs amid international row
Written by Kunal Sawhney, CEO, Kalkine
The British government has indicated that it will go ahead to protect the British steel industry even if it must breach the World Trade Organization (WTO) rules. At the G7 summit in Germany, prime minister Boris Johnson proposed protectionist measures somewhat similar to what is being used by other European countries.
For last some time, the government has been under immense pressure from the steel industry and the opposition to extend metal import limits carried in after departure from the EU. Now, as the industry is going through a difficult time due to the energy crisis, the government is all set to extend the existing tariffs on steel imports from China, which would also be supplemented by imports from countries like India and Turkey.
The UK steel industry has already shrunk over the decade and is struggling with skyrocketing energy prices. The government has said that its policy is not to treat its industry in the way that some other countries do.
What do WTO rules say?
World Trade Organization (WTO) framework talks about the Tariff Rate Quotas (TRQs), which stipulate the quantity of product or material that can be imported from a country before a higher tariff comes into the picture. Till now, the UK’s trade remedies system has been following the WTO rules and is ensuring that the UK industries remain insulated from any unfair trade practices or sudden surges in imports.
Under World Trade Organisation (WTO) rules, safeguard measures are among the three types of trade protections provided to industry. The other two include anti-dumping measures and countervailing measures against countervailable subsidies.
Last year in September, the Trade Remedies Authority started a reassessment of its proposal to the international trade secretary on the UK’s steel tariffs, taking into consideration the applications received from stakeholders.
Protectionism measures
In principle, the UK government champions free trade, the fight against protectionism, and the removal of barriers at every opportunity. However, the increase in exports of steel from China and some other nations spurred the increase in trade protection for the UK as well as various other countries. The safeguards are primarily aimed at protecting domestic producers from cheap imports. And a quarterly quota for steel products with nominal duty is fixed, while once that quota is exhausted, a 25% tariff comes into play to stop the oversupply.
It is worth mentioning here that the protectionist 25% tariffs on imports were first imposed by the EU in 2018 when the UK was a part of it. At that point in time, it was meant to safeguard domestic industries when a huge amount of steel products started pouring in from the US after the then President Donald Trump levied tariffs on non-US steel.
Though the UK reached an agreement with the US to remove the Trump-era tariffs on UK steel and punitive tariffs imposed on American products. However, US tariffs were not removed from other countries, which gave producers an inducement to find buyers elsewhere.
What has happened in the last few years?
The review of the transitioned steel safeguard measure was initiated on 1 October 2020. While the trade quotas inherited from the EU were retained on 10 items, the remaining got a temporary extension of one year.
When the restrictions on ten categories were already extended till 2024, the remaining five categories, which are set to expire this week, will likely get extended for a further two years. The decision may put the government in a major row with the EU, but it may protect the domestic industry from the glut of steel products when it is struggling with the sky-high energy prices.
