Don’t Blame China for the Steel Crisis

Conrad Landin

In the House of Commons last Monday, the business secretary Sajid Javid said Britain’s steel industry had experienced an ‘absolutely devastating’ few months. ‘Punitive tariffs and sky-high duties always seem like a nice, easy solution,’ he went on, ‘but the truth is that excessive, protectionist trade tariffs simply do not work.’ Conservative MPs voted down Labour’s motion, which called for tougher penalties on the dumping of Chinese steel in Europe, by 288 votes to 239.

Javid’s position did not find much support on the streets of Brussels on 16 February, when the head of Tata Steel Europe, Karl Koehler put on overalls and a hard hat to march alongside thousands of workers. This was notable in itself, but even more surprising was that none of his workforce turned on him for the recent loss of 2000 jobs. ‘I can’t knock Tata,’ Martyn Rees, a convenor for the GMB union at Port Talbot steelworks in south Wales, told me. ‘This is a quite unique chance for management to stand with us.’

The crisis, which has seen the closure of the SSI steelworks in Redcar, has been blamed on a ‘perfect storm’. The cost of industrial electricity in Britain has risen sharply. But most anger at the demo was directed at Beijing, which has been blamed for driving prices down by flooding the market with cheap steel. UK imports from China quadrupled from 2 per cent to 8 per cent between 2011 and 2014.

‘Dumping’ is the trade term for exporting products at a lower price than their ‘normal value’ in their home country. The EU can impose tariffs to make up the price difference to the normal value, though this a lengthy bureaucratic process. For centrally planned economies such as China, EU officials have to account for the fact that the home price may be subsidised by the state. They instead use the value of the product in a ‘surrogate country’ – Mexico, say – to work out the mark-up.

But the calculation will be all but impossible if the EU awards China ‘market economy status’. The British government is keen to see this happen. ‘It will mean the trade defence mechanisms are still there, but they’ll be a lot harder to prove and almost impossible to take any sanctions,’ according to Roy Rickhuss, the general secretary of another steel union, Community. British ministers also want the EU to keep its ‘lesser duty’ rule, which means tariffs are significantly lower than the actual difference between prices.

The Labour MEP Jude Kirton-Darling, who sits on the European Parliament’s trade committee, seemed a lone voice on the demo acknowledging that the issue was wider than China: ‘The problem for manufacturing across the board – steel and every other sector – is that there’s been intense financialisation of our manufacturing industries. They operate on short-term shareholder value models which means they have to prove a return much quicker than is actually possible in manufacturing.’

She argued that any blame laid at the EU’s door was misplaced, attacking instead the British government for blocking further regulation. There was no evidence of mass Eurosceptic feeling among steelworkers on the march. But even enthusiasts for the common market acknowledged that their opponents would hold up the steel crisis as evidence of Brussels neglecting British workers.

When I caught up with Koehler in the Parc du Cinquantenaire, I asked him if his company had let down laid-off British workers through its lack of long-term interest. ‘We are definitely running out of steam as a private company to make all these losses,’ he said. ‘Tata Steel has invested... more than £1.5 billion in the UK.’

Britain’s industry has been in private hands since 1988; other European countries followed suit. A delegation from the Portuguese union Sindel were as happy as the British workers to march alongside their bosses. ‘As workers, we are the companies,’ one of them told me.


  • 8 March 2016 at 8:40am
    cufflink says:
    A penetrating and above all timely re-statement of the perennial problems of a basic supply industry.
    The fact is that a basic supply of a sector commodity cannot withstand these fluctuations in demand unless it controls to a great extent the route of contract ie all product must have added value such as to preclude immediate competition in the short term. This means that design must build into supply either by developing subsidiary use through conglomeration of subaltern need which was the lesson learned in America after 1929 (viz General Motors and Ford) or by regulated tariffs.
    The word 'Tariff' is not a bogey but a boon - the thing is it must be adjustable and form an essential blood supply to its own industry as a negotiation counter to dumping.
    It cannot now happen that bulk plate steel is just shipped onto a market; there are too many doing that, it must develop a couture of supply. 'You want steel? In what shape?'