UK to EU’s proposal to “add more tariff” on China: It would not be right

EU countries including France and Italy, has pushed EU to scrap regulations known as “lesser duty rule”, which currently prevents the European Commission from imposing higher tariffs on China, to save the Europe steel industry. However, the UK government, while being widely criticized, confirmed it would not go for this proposal, saying, “It would not be right”.

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David Cameron has been accused of failing the British steel industry after the government blocked the new tariff. Photograph: Murdo MacLeod for the Guardian

The steel industry in Britain and Europe has been experiencing a severe crisis, and European countries believe this crisis is mostly caused by a wave of cheaper steel imports from China. After EU already imposed a higher tariff on Chinese steel import on January, European countries are now trying to pass a proposal that lifting the current “lesser duty rule”, which will allow countries to impose even higher tariff on Chinese steel products. However, Sajid Javid, the business ministers in Britain, refused this proposal because higher tariffs could hurt UK jobs and growth overall.

The steel industry in Britain is facing an impending risk of collapse. With a combination of high labor cost, increasing energy cost, environmental regulation cost, adding up with China’s cheap steel imports, many British steel companies such as Tata, have past their breaking point. Over the last summer, the industry saw the loss of more than 5000 jobs. Many industry giants claim that they cannot compete with “cheap steel from China flooding the market”. The severe situation explains the fierce countrywide criticism when British government put veto on the EU’s new proposal on tariff.

However, Sajid Javid sure has some pretty good reasons for blocking the proposal that seems to be helpful for the steel industry. “A responsible government would look at the impact overall to British industry and British jobs. If duties are applied that are disproportionate, it would have an impact, in Britain and elsewhere, on the consumers of steel as well,” Javid said.

True, rising tariff would sure increase the competitiveness of domestic steel industry, but it is also worth considering the negative consequences on the consumers of steel, which is widely used in basically all the industries in Britain. Blocking Chinese steel import would greatly increase the market price of steel, and every single steel downstream company would take a suffer, which eventually harm the consumers.

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While global steel output has accelerated over the past four decades, the UK has been left behind. Tanya Powley, the FT’s manufacturing correspondent, visits Celsa’s plant in Cardiff to find out if UK steelmakers still have a future.

video link:Is there a future for UK steel

China has warned of the consequences of the EU imposing tariffs on its steel exports that the overcapacity in the metal industry is a global problem. Minister of commerce in China also said “China safeguards the right to defend Chinese businesses in accordance with the rules of the World Trade Organization.” Some may say it is a hint for trade war as a fight back from Beijing.

With more protectionist trade measures introduced worldwide, there are worries that protectionism has been greater since 2012, putting globalization under threat, and trade war is the last thing countries want to engage. Since British steel industry clearly no longer posses comparative advantage as it did during industrial revolution, Britain should reconsider the future of its steel industry, and perhaps reshaping the industry to the new market and resizing the employment is a better solution than imposing a high tariff. After all, weakening steel demand and contracting industry is a worldwide problem, and imposing something such as “45% tariff on Chinese imported goods” is just so Donald Trump that would lead to nowhere.

Though the future of steel industry in Britain is still not clear, Cameron’s government is keeping a clear mind on the imported tariff issue. When supporting one industry, it is also wise to remember there are many British industries that would cost jobs and growth and certainly their exports if tariff goes out of control, dragging the whole country to suffer.

 

 

Reference

http://www.telegraph.co.uk/business/2016/02/23/china-hints-at-steel-wars-as-it-says-excess-production-is-global/

http://www.theguardian.com/business/2016/feb/10/david-cameron-accused-failing-uk-steel-industry-blocking-eu-lesser-duty-proposal

http://www.telegraph.co.uk/finance/newsbysector/industry/12155118/Steel-industry-set-for-crunch-meeting-with-European-bureaucrats-over-trade-duties.html

http://www.ft.com/intl/cms/s/3/89620006-d59c-11e5-829b-8564e7528e54.html#axzz41Uh7ZDDf

 

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