The Way To Bet

Nils Pratley writes:

Hands up, who wants to open a trade war with China to protect the UK’s and the European Union’s steelmakers?

The sad truth about the crisis in the UK steel industry, where Tata Steel yesterday cut 1,050 jobs, including 750 at its Port Talbot plant, may be this: in the current climate, nothing less than stiff tariffs on imported Chinese steel will meaningfully improve the lot of UK and EU producers.

The figures from UK Steel, the industry lobby group, are striking. Chinese steelmakers are believed to be losing about $34 (£23) a tonne on the crude steel they produce.

China’s top 101 steel producers, most of them state-owned, lost about $11bn during the first 10 months of 2015, or roughly twice what they made in profits the previous year.

China’s exports of steel have risen from 7.2m tonnes in 2003 to 107m tonnes in 2015.

This is globalisation in action, accelerated by a slowdown in the Chinese economy that has encouraged its domestic steelmakers to turn to export markets with greater vigour.

A UK steel industry that employed 30,000 at the start of last year will soon be smaller by a fifth.

The UK government was criticised, rightly, last year by a parliamentary committee for being slow to react to the looming crisis and for doing less than other EU states.

But note what the business committee also said about the resulting government measures, such as the bringing-forward of compensation for energy-intensive industries:

“Even when fully implemented, these measures should not be seen as the answer to the long term difficulties faced by the UK industry as a result of the expansion of production and dumping of steel in the UK market by China.” 

Quite.

The UK government can alleviate some short-term financial pain for the likes of Tata, but it cannot wish away China’s over-capacity in steel.

Does the EU have the political will to slap tariffs on Chinese steel to discourage dumping?

Optimists in the industry point out that a 24% import duty on wire rod, a small part of the industry, has been in place sine 2009.

But they also grumble, understandably, that the European Commission takes 12 months to conduct its anti-dumping investigations whereas equivalent authorities in the US do the job in about three weeks.

That difference in speed, one suspects, reflects the vastly different appetites for imposing tariffs. In short, the Europeans don’t have the stomach.

Indeed, ask yourself whether George Osborne, having invited the Chinese to build his “northern powerhouse” and a couple of nuclear power stations in the UK, would really be prepared to support a tit-for-tat tariff war with Beijing.

Maybe the European Commission, when its latest investigation finally reaches a conclusion, will surprise us by recommending “quick and effective anti-dumping action”, as lobby group UK Steel hopes.

But it’s not the way to bet.

And Peter Hitchens writes:

Our military industries survive because they are the only ones we can protect from foreign competition.

Nobody admits this, but any government can find ways of giving preference to its own manufacturers for defence contracts, and all do, despite the supposed commitment to total free trade in the EU and elsewhere.

I am amazed that there is no serious protectionist strand in modern British (or American) politics, given the devastation which has been wrought , and is being wrought, on our mining and manufacturing industries by free trade.

Since Ross Perot was defeated by Al Gore’s largely irrelevant comparison of his policies to the Smoot-Hawley laws, there hasn’t been a major protectionist voice in any big manufacturing country

But Germany, by ingeniously using membership of the Euro to effectively devalue the Deutschemark, has achieved a level of protection for its industries, at the price of reducing its own living standards, without getting into trouble.

They'll both endorse Corbyn in 2020. Of course they will.