Lord Hannan of Kingsclere is a Conservative peer, writer and columnist. He was a Conservative MEP from 1999 to 2020, and is now President of the Initiative for Free Trade.
If, as reports suggest, ministers are about to extend steel tariffs, in defiance of both our national interests and our international commitments, they will throw away any claim to economic competence.
The proposed measures are so obviously self-harming that I don’t believe a single member of Cabinet can truly be convinced by them. Once again, Britain’s long-term growth is being sacrificed to short-term headlines, or to calculations about how individual MPs might vote in a future leadership contest.
Let’s review what has happened. In 2018, retaliating against Donald Trump, the EU imposed a tariff of 25 per cent on various categories of steel products. Britain inherited this tariff when Brexit took effect.
In 2021, our Trade Remedies Authority (TRA) looked at the measure and found no economic justification for most of the tariffs, some of which covered products that were not made in Britain.
The TRA’s recommendation was overruled, evidently following lobbying from MPs with steel-making constituencies. It is hard to know whether these MPs wanted specific barriers or whether they simply wanted to pose in general terms as champions of a local industry.
At any rate, ministers are now reportedly going further, extending the 25 per cent tariff beyond its scheduled lapse.
Think about what that price hike means for downstream industries. More than half our steel is used in construction. Raising its price by 25 per cent means more expensive houses and fewer people working in the sector.
Around 22 per cent of the costs of car-making are tied to steel. Again, needlessly pushing those costs up makes the industry less competitive, deters investment and destroys jobs.
The same goes for almost every other steel-using sector, from aeronautics and agriculture to domestic appliances and rail. Steel tariffs make everyone worse off, reducing productivity and leaving consumers with less to spend on other things, thereby hurting the entire economy.
Some of these consumers, by the way, will work in the steel sector – but not many. Steel employs around 34,000 people in Britain, compared to 166,000 in the automotive sector, 476,000 in agriculture, 95,000 in aerospace, and perhaps two million in construction.
All these groups will be hit by the needlessly higher prices, as will the rest of us. So much for “doing everything we can” to deal with the cost of living crisis.
A better way to help the steel sector would be to moderate our obsession with net zero. Or, if cheaper energy is not feasible, and if there really is a strategic need to keep an uncompetitive steel industry in this country, it would be far more efficient to subsidise it directly than to mess up the whole economy with tariffs. At least direct grants would go straight to the sector.
But, when we examine the data, we find no such strategic need.
Supporters of the tariffs mutter menacingly about China. But China is not among our top ten suppliers, which in 2021 were Spain, Germany, Belgium, Netherlands, France, India, Turkey, Vietnam, Ukraine, and Italy.
Even if we go back to the period before the EU’s tariffs, China was pretty marginal to this country. In 2016, our chief sources of imported steel were Germany (14 per cent), Belgium (nine per cent), Spain (nine per cent), the Netherlands (eight per cent), China (seven per cent), Turkey (six per cent), and France (six per cent).
Those figures are for imports, not total supply; the UK is still its own largest supplier.
Nor, by the way, are we running much of a deficit in the sector. The UK buys £4.5 billion of steel products from abroad, and sells £3.7 billion, largely because it specialises in high-quality steel and imports cheaper stuff.
This is, by any definition, a comfortable situation. Security – whether in steel or anything else – depends upon having a diverse range of global suppliers, so that we are not vulnerable to a local shock or disruption, which might as easily happen on our own territory as anywhere else.
The EU’s embrace of tariffs has pushed several of their manufacturers to explore relocating to countries with cheaper steel. We should be seeking to attract those companies instead of pushing them away.
As if all this were not enough, ministers can’t find a lawyer prepared to argue that the extension is permitted under WTO rules. So, as well as pushing up prices and shrinking our economy, we risk retaliation against our exports from other states.
All this is happening when we are supposed to be, as Boris Johnson put it in 2020, “re-emerging after decades of hibernation as a campaigner for global free trade.”
In the same speech, the Prime Minister spoke warmly of joining the Pacific trade nexus, the CPTPP. He was quite right: the Pacific is the world’s economic centre of gravity, and Britain is uniquely well-placed to benefit from links with the countries around it.
But how does he expect those countries – South Korea, for example – to respond to a patently illegal tariff for which the UK’s own official body can find no justification?
Not that I want to pick on Johnson. Collective responsibility makes every minister complicit. So let’s ask them.
Does (or did) Rishi Sunak want to push up prices in a cost of living crisis? Does Anne-Marie Trevelyan support an action that could start a new set of trade wars? Is Liz Truss happy to see the UK give up its moral leadership? Is Ben Wallace relaxed about pushing up the cost of defence procurement? Is Grant Shapps content to see the cost of HS2 rise by another £1.5 billion to pay for artificially expensive steel?
Are the other ministers sitting around the Cabinet table prepared to burden our manufacturers just when we should be pulling every lever to stimulate growth?
The worst of it is that this is not a one-off blip, an anomaly from a government otherwise engaged in across-the-board liberalisation. Two-and-a-half years after Brexit, we retain a series of tariffs, including on things we don’t make here, such as bananas and olive oil. So much for global Britain.