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Steel Crisis: The Tories Are Part of the Problem, The EU Is Part of the Solution

07/04/2016 17:26 | Updated 07 April 2016

The withdrawal of Tata from the UK has come as a further blow to steel communities. The steel crisis has already claimed thousands of jobs in Redcar and the North East. Thousands more are now at risk in Port Talbot, with huge troubles looming for steelworks all across the country, as China continues to fuel a price war that has made fair competition in steel a thing of the past.

In recent days, the steel crisis also got embroiled - courtesy of our very own UK-made populists - in the EU referendum debate. Yet Nigel Farage would be forgiven for laying the blame on the European Commission's doorstep. That is not because what he says is right, but because he is only repeating somebody else's lie.

The UK government spent the crucial first few months of the crisis incriminating the EU for its own faults, before slowly coming to terms with the fact that they are in charge and therefore responsible. As a result of this, we are now paying double the price for the crisis: the government's conduct has severely damaged the prospects for the steel sector; and it has also severely damaged the prospect for the EU referendum.

The simple, unadulterated truth is that the EU has been trying hard to be part of the solution for UK steel. The government has been consistently part of the problem.

It is the Conservative party's ideology that is to blame, not EU rules. The Tories are libertarians who believe that the state has no role to play in the economy, despite EU rules allowing direct state aid to ailing industries in certain circumstances. The government let the Redcar steelwork go bust in 2015, arguing that the EU would not permit them to save it. We have always argued that this was just an excuse: nothing in EU law prevents a government from stepping in, as long as certain conditions are met. The French, German and Italian governments have done it in the past. Now the UK government is considering whether to temporarily nationalise Port Talbot. It's great that they are finally seeing the light, but this won't give us Redcar back. It won't undo the damage already done.

China is pursuing a determined strategy to take over the European market. Their plan is to keep prices as low as possible until all EU producers are forced out and unable to return. This is costing China a great deal as they have to subsidise their own steel sector heavily to keep prices artificially low. But this will pay off eventually: China will soon be the only provider of steel in Europe, and thus be able to raise prices as it sees fit.

Rather than letting UK taxpayers bear the full cost of this war of attrition, we need to correct prices on the market to end the battle for good. The Conservative Party's ideological bias is the biggest hurdle we have to overcome in order to be able to do so. Unlike the European Commission, or even the World Trade Organisation, the Tories equate legitimate defensive measures against unfair trade with protectionism. Until we can convince them to shift on this too, there won't be any lasting relief for UK steel.

The European Commission proposed in 2013, well before the crisis started, to relax EU rules so that much higher anti-dumping duties could be charged on unfair Chinese imports. Half of EU countries agreed with that, and so did the European Parliament. But the UK government managed to block any reform, using all its diplomatic skills and EU procedures to its advantage. So much for the argument that our government has lost control on EU decisions. In reality, this shows that our country has the power to veto anything from Brussels, even reforms that would definitely be in our interest.

We've been calling on the government to lift its opposition to this reform, the removal of the 'lesser duty rule', for months now, and I was very pleased to see the press starting to relay this message last week. But after arguing that the reform was not desirable because it would impede free trade, the Business Secretary's new line is that the reform is not needed because the current measures are actually working just fine.

The government's latest excuse for inaction is called 'registration'. It was deployed by the Commission for the first time last December on two steel products, at the request of the industry. What it does is to warn EU importers of the product, that whatever tariff may be imposed at the end of the anti-dumping procedure, which takes an average of 8 months, may also be charged retroactively on all imports made as early as three months before the 'registration' was notified. The government argue that as a result imports from China of that specific product have virtually stopped.

If confirmed this would indeed be good news. But if, in the end, the actual tariff is set at a level that is too low to deter dumping, importers would simply resume buying from China and registration would have only bought us a few months. It won't be enough, and can't be a substitute for scrapping the lesser duty rule.

The government's concerns about the Welsh elections are spurring them into starting to make the right noises which shows that there's hope. It's high time for the progressive forces in the UK to seize the momentum and raise the pressure to save UK steel - and set the EU record straight. At any rate, leaving the EU would do nothing to save our steel. With the Tories in power (and with fixed term parliaments they can be until 2020), it would in all likelihood lead to a rapid demise of this strategic industry.

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