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EU not to blame for steel’s hammering

by Sam Ashworth-Hayes | 01.04.2016

160 years after a British inventor inaugurated the era of mass produced steel, the British branch of the industry is in crisis. Tata Steel, which employs 15,000 people across the country, is selling its UK operations.

UKIP industry spokesman Roger Helmer says this is “a direct result of EU policies”. But this is not fair. If foreigners are to blame, they are in China. Massive Chinese overproduction of steel, subsidised by the Chinese government, is putting pressure on steelmakers across the world.

Tariffs

Helmer argues that the EU hasn’t done enough to stop China ‘dumping’ cheap steel into Europe. It is true that the EU could have acted faster to impose a tax on Chinese steel sold at unfair prices, and that these tariffs are far lower than those imposed by the United States. But the EU’s limited response reflects lobbying by the UK government, which believes that higher tariffs would raise prices to consumers and damage the wider economy. If UKIP wants higher tariffs, its real beef should be with Sajid Javid, the business secretary, who has resisted tariffs on a scale that would match the US.

State aid

Helmer says EU rules stop us from using short-term state aid to save steelworks. The UK is an enthusiastic proponent of exactly these rules, and has supported recent EU investigations into Italian and Belgian government support for steelworks. Again, there is a good reason for the UK’s position. If we ask for special treatment for steel, other countries will do the same. Subsidies will mount up; Europe will be countering Chinese subsidies with subsidies of its own, prolonging the global overproduction that caused the crisis in the first place. Meanwhile other EU members might also seek permission to subsidise other domestic industries that compete with UK producers. The fairness of the single market would be undermined, with the bill footed by the taxpayers.

Contrary to what UKIP implies, Britain might not be much freer to deploy state aid if it were out of the single market. Assuming that the UK was still a member of the World Trade Organisation, other countries could argue that our subsidies were contrary to World Trade Organisation rules. The EU would probably retaliate by imposing duties on unfairly subsidised British steel. The USA certainly would. Indeed, it already has.

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Some commentators suggest that the UK might be compromising national security by allowing the disappearance of a domestic steel industry. But to the extent that the steel industry is vital for our defence, we can subsidize it. Professor Steve Peers points out that specific exemptions for arms and war materials exist under EU law, allowing the UK government to purchase from domestic suppliers at higher prices for purely military purposes.

Whether or not we’d want to is a different matter. We manufacture our jets with the Germans, buy fighters from the Americans, and organise forces with NATO. When our security is already tightly bound up with our allies, securing domestic steel production might not make us much safer.  

Renewable energy

Helmer also blames the EU for the plight of British steel by going after energy policy. He criticises the effect on energy prices of the EU’s “obsessive over-commitment to intermittent and unreliable renewables”.

The UK chose of its own free will to vote in favour of EU renewable energy targets. While its pursuit of that target has increased energy prices, that’s the result of UK choices about the way we have sought to hit the targets–for example, we have funded renewables subsidies through levies on energy suppliers. The government has now acted to reduce the burden of these levies on energy intensive industries, with EU state aid approval.

Helmer’s office did not respond to a request for comment.

Edited by Sebastian Mallaby

2 Responses to “EU not to blame for steel’s hammering”

  • Did I miss the point of this article ? It looks like a bit of UKIP bashing when it pretends to be presenting IN campaign facts. Again we see scare tactics using words like ‘might’ with no real explanation about how we as a country can help our steelworkers industry in or out. I saw confirmation and we’ve heard it from the Prime Minister that the EU could have prevented this with Levy’s but haven’t, indeed they are investigating member countries that have taken measures. Surely we would have to firefight individual industries if we are attacked in this way . I still have not heard what is going to be better if we stay in. Since we joined the EU this country has gone downhill, give the independence campaigners a chance to make it great again.

  • Allan

    I am a swing voter but on state aid and tarriffs I think the facts stated in this article are as acurate as they can be. If the UK was outside the EU and subsidised the steel industry, both the EU and the US would tariff UK steal imports that would effectively kill the EU and US demand for brittish steel. Furthermore, the subsidies would be contary to WTO regulations.

    On this point, what we gain from being in the EU is that all EU countries are on a level playing field i.e. no member state can provide state aid or tariff the import of products from other member states.