UK Steel Industry

Richard Fuller Excerpts

Monday 29th February 2016 Commons Chamber

[Ms Eagle]

I am coming to that later in my remarks, but my hon. Friend is exactly right: all energy-intensive industries are affected, and ceramics is one of them.

If they are accurate, I welcome the media reports from today’s European Union Competitiveness Council, which appears to have agreed that the Commission should accelerate anti-dumping action. I look forward to much more detail from the Secretary of State when he responds to the debate on what that will mean in practice. Until then, we must judge the Government on their actions to date.

Our motion calls on the Government to stop blocking reform of EU trade defence instruments, which would enable defensive tariffs to be imposed much more quickly and at a level that would actually prevent imports of unfairly traded steel products from China. The Government should support the scrapping of the lesser duty rule, which is preventing tariffs from being set at a level that will actually deal with the problem. After months of agitation and a massive increase in Chinese imports, especially to the UK, the European Union has finally set its tariff on a particular product—Chinese rebar—between 9.2% and 13%. Meanwhile, the USA has introduced defensive tariffs of 66%, and they were operating 45 days after the start of its investigation. To work, tariffs have to be high enough to deal with the problem—the EU tariffs are not.

It is important to make it crystal clear that we are objecting to blatant and unfair dumping, not to free trade, which the Opposition support.

[Richard Fuller (Bedford) (Con)]

I am interested in what the hon. Lady is saying, but does she not feel the chill wind of the 1930s, which saw the infringement of free trade as people eagerly moved to impose tariffs? Over the last 10 years, China’s share of world trade in steel has grown from 30% to more than 50%, so whatever the tariff, there will be further calls for higher tariffs, with consequential disadvantages for all.

[Ms Eagle]

I was trying to make it very clear that we are talking about unfair trade—dumping. We are not talking about fair trade.

[Ms Eagle]

My hon. Friend is exactly right: we have to distinguish between free trade, fair trade and unfair trade, and what we face with Chinese steel imports is clearly unfair. Dumping is unfair, and it is threatening the very existence of the UK steel industry. Everyone in the House knows that once steel facilities have gone, they cannot easily be put back. We have to protect our industry’s capacity to exist, and perhaps to do better in future, when world conditions have changed. If we do not bear that in mind, we will lose the lot, and we will regret it.

[Richard Fuller]

The hon. Lady will find that there is a lot of understanding across the House for the point she makes. My point is just that, over the past 20 or 30 years, we have become reliant on China producing many things, and the hon. Member for Stoke-on-Trent North (Ruth Smeeth) mentioned ceramics. My concern—perhaps the hon. Member for Wallasey (Ms Eagle) can address this—is about where we make the distinction in terms of the tariffs we impose. Does she not have the slightest concern that a series of such issues may come up in sector after sector because of the growing reliance over the last few years on Chinese exports?

[Ms Eagle]

We need to have an industrial strategy, and we have to ensure that imports into this country are appropriately priced and fairly traded.

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[Sajid Javid]

The hon. Lady will know that that is not in the gift of any single Government in the EU; the issue is EU-wide. As I have explained, it is important to use the existing rules effectively, and we support taking further action where the tariffs are not imposed quickly or if they are not high enough.

[Richard Fuller]

rose—

[Sajid Javid]

Let me say more about tariffs and then I will take some more interventions. Punitive tariffs and sky-high duties always seem like a nice, easy solution, but the truth is that excessive, protectionist trade tariffs simply do not work. Although they provide a short-term boost for the protected sector, they inevitably cause long-term harm to the wider economy. They drive up prices.

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[Sajid Javid]

That is exactly what we are delivering on and what the current framework allows us to do.

[Richard Fuller]

There is undoubtedly anguish in the industries and sectors affected by the impact of change on the steel industry, but does my right hon. Friend agree that, over the past 30 years, global free trade has had the best impact on jobs, wellbeing and living standards, and that he has a responsibility not to indulge in tit for tat retaliatory measures on tariffs in pursuit of a good cause, because of the consequential impacts on other aspects of trade?

[Sajid Javid]

My hon. Friend is absolutely right. That does not mean that it is not possible to have tariffs; of course they are possible when there is unfair trading, and that is exactly what we support. That is what the current set of rules used by the EU allows.

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[Richard Fuller (Bedford) (Con)]

It is a pleasure to follow the Chair of the Business, Innovation and Skills Committee who made a well-informed contribution, and it is a privilege to serve on that Committee with him. I commend the hon. Members for Middlesbrough South and East Cleveland (Tom Blenkinsop), for Llanelli (Nia Griffith), and for Scunthorpe (Nic Dakin), my hon. Friend the Member for Brigg and Goole (Andrew Percy) and many other Members across the House whose employees or constituents are affected directly or indirectly by the tremendous challenges faced by the steel industry. Their constituents can know that their Members of Parliament are doing the best they can to get the best deal for their constituents, and they are doing it in the most effective way in Parliament. They are a tribute to their constituents.

The steel industry is undoubtedly facing massive changes. As my hon. Friend the Member for Bexhill and Battle (Huw Merriman) mentioned, the growth of the Chinese steel industry—initially to serve the international market but over the last decade to serve its own domestic market—has created tremendous challenges for the rest of the world economy at a time of reduced demand both in China and internationally. It is fair to say that mistakes were made by the coalition Government and the preceding Labour Government in preparing the steel industry for those changes.

For example, if Members read about energy prices on page 12 of the Select Committee report, they will see that the big change in energy prices for the United Kingdom relative to our European competitors came under the Labour Government in 2005-06. In retrospect, we concede that that was an unsupportable burden for our energy intensive industries, and the Government were at fault not to assess that. Equally, the coalition Government were at fault in not responding to the pressures placed on them by Members of Parliament to make subsequent changes.

I heard what the Secretary of State said about business rates, but I hope that he and the Chancellor will look again at what can be done with that, not just in the steel sector but more broadly in industry and retail. Business rates seem to me a tax that is very relevant for change.

[Tom Blenkinsop]

The hon. Gentleman mentioned 2006, but in that period Corus was bought by Tata because of the economic signals, and it thought that it was a good purchase. Celsa in south Wales refitted the electric arc. Judging by the indicators, including energy prices, industry at that time thought that Britain was a good investment.

[Richard Fuller]

The hon. Gentleman’s intervention was timely because I am about to talk about industrial strategy. As he pointed out, mistakes can be made, and when the Committee had a vote on whether we should mention the industrial strategy, I was the only member of the Committee to vote against that. Personally, I believe that Governments’ industrial strategies are nonsense, a mirage, a deceit, or, too often, a failure. Governments can take actions, they can spend money and they can show their preferences and priorities. All of that I accept, but an industrial strategy becomes a straitjacket that limits our actions and can set us up for big problems in international trade.

Finally, the core of what we are discussing today are duties. The Secretary of State was absolutely right to point to our responsibilities under the WTO with regard to tariffs, and the fact that that sets a framework for us to respond. He is making those calculations in a careful way. It was interesting and I think welcome to many that he believes further changes on tariffs could be made within those rules. He is also right to say that changes to the lesser duty rule are not appropriate at this time.

As I mentioned in an intervention on the shadow Secretary of State, I am fearful of what the tariff and counter-tariff arguments can do. Many Members have talked about what the United States is doing and that we should therefore do more, but this is where the breakdown of global trade begins: tariff and counter-tariff, competitive devaluation, recession and slump. When we perceive that a change in tariffs is fair and not about trade but about dumping, I would say to hon. Members that just because we may believe that that is the case does not mean that that is how it is perceived by those on whom those tariffs are imposed. The consequence of the Chinese economy having a retaliatory effect on the United Kingdom and other countries is where the breakdown in global trade can begin. Free trade is a global good.

[George Kerevan (East Lothian) (SNP)]

Does the hon. Gentleman not accept that we are in exceptional times, and that by suspending the lesser harm rule and presenting the Chinese Government—most Chinese heavy steel plants are state-owned—with a major fait accompli, we might force negotiations on China to restructure its steel industry, whereas if we just proceed piecemeal we will not resolve anything?

[Richard Fuller]

If I may, I would like to address that point directly in a few minutes.

Free trade is a global good. It enriches us. It broadens choice. Free trade, by bringing people of the world together, makes us safer. We have a responsibility, even in these difficult and straitened times, as the hon. Gentleman says, to protect free trade. Those of us here in the United Kingdom have a special responsibility to protect free trade, because we have been one of the major proponents of free trade over the past century and a half. That is something worth protecting and worth bearing in mind at all times.

The hon. Member for East Lothian (George Kerevan) asked whether we should, essentially, toughen up in these special times with China. I think we are seeing indications that China understands it needs to toughen up as well. China has said—I am not an apologist for China; trust me, I like the other china—that it wishes to reduce its productive capacity, with one quarter of its production being taken out of commission. It is planning to reduce employment in this sector by 400,000 jobs. China is taking steps that indicate that it sees a responsibility to satisfy not just its own consumption and demand but its responsibilities in the global economy. Members should bear those thoughts in mind as they come to their conclusions.

[Richard Graham]

My hon. Friend’s defence of free trade is admirable, but he is not suggesting, is he, that the Government are wrong to look at various ways of mitigating the problems that the steel sector is facing, in particular with regard to energy and on procurement?

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[Richard Fuller]

My hon. Friend is exactly correct. That was outlined by the Secretary of State in his speech and is, I think, warmly welcomed on both sides of the House.

I commend the shadow Secretary of State for an excellent start to the debate, and for her clarification of her continuing support for free trade. That is an important message to be heard on both sides of the House at this difficult time. She understands, as I think many other hon. Members do, that there is a very special concern for the people affected by the steel industry. I think she also understands that there is a broader responsibility for the community as a whole to uphold free trade. I am sure she would recognise that the task for her opposite number, the actual Secretary of State for Business, is that he has to make those very difficult judgments now. He has to listen to representations from Members of Parliament about the impact on their constituents. He also has a responsibility to ensure that the United Kingdom remains a strong voice for free trade, ensuring that the right penalties are placed on dumping and that the broader interests of the economy of the United Kingdom are upheld. I believe he is doing an excellent job.

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[Richard Fuller]

I think that the hon. Gentleman and I have a substantial disagreement on this point. Is he not worried that if the European Union were to follow America in imposing very high tariffs, the United States would impose even higher tariffs? Would we not get into a situation of ever-higher tariffs being imposed by either side, which would reduce global trade?

[Tom Blenkinsop]

In 2004, the Bush Administration imposed tariffs of more than 20% on European steel going into the US market. That level was eroded through negotiation. At this moment, China imposes tariffs on our products—British and European—that are already going into its market. So that tit-for-tat has already started. China already imposes huge tariffs on EU products going into its market. Why we are not protecting our own market and the European market—which, I might add, is the largest in the world—is beyond comprehension. I repeat that this is not about protectionism. It is about levelling the playing field to give British steel a domestic safe place to trade, within the European Union and externally. At this time, however, China is not abiding by World Trade Organisation rules, which must surely affect its future market economy status, which will be debated by the European Union.

This brings me to the point about market economy status. Currency manipulation by China has also acted as a subsidy to its exports to EU member states and other countries, while China reciprocates by taxing EU exports. This, along with direct export subsidies, support policies and the rapid growth of planned investments in leading and pillar industries in China’s five-year development plans, has led to sustained, deliberate overproduction and substantial excess capacity throughout Chinese manufacturing.

Even without MES, China has dramatically increased its exports to Europe by a remarkable 11.1% annual rate over the past 15 years—they rose from €74.6 billion-worth to €359.6 billion-worth in 2015. Put simply, the Government support Chinese MES, whether Britain is within the EU or outside it. I would argue that we may negotiate internally or externally, but we are in a far more difficult position as a population of 70 million than as the largest economic bloc in the world. The forecasts suggest that whether this is done inside or outside the EU, Chinese imports will rocket by between 25% to 50% in the next three to five years if MES is granted. That is devastating for not only steel, but every other industrial manufacturing sector. I come from the Teesside area and we do not just make steel there. We must not write off steel in our area, because we still have the beam mill in Redcar, Skinningrove in my constituency—