UK Steel Industry

Tom Blenkinsop Excerpts

Monday 29th February 2016 Commons Chamber

[Ms Eagle]

I certainly agree with my hon. Friend’s observations and share his surprise that Swedish steel is being used in Ministry of Defence contracts in quite that way. I note that it appears to be a Conservative donor company that was doing that work. I join him in commending the Daily Mirror for its fantastic Save Our Steel campaign, which has highlighted the very real effects of the current crisis on steel communities up and down the country. Long may it continue to help us campaign to save this vital industry.

In the light of all that, why has the Government’s response to the steel crisis been so complacent and ineffective to date? Perhaps it is because we have a Business Secretary who is ideologically indisposed to taking any worthwhile action as he does not actually believe in the concept of Government action at all. Perhaps it is because we have a Business Secretary who has read far too much Ayn Rand and thinks that markets should somehow just be left to look after themselves. Perhaps it is because we have a Business Secretary who will not let the phrase “industrial strategy” even pass his lips.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

Is my hon. Friend concerned that the Business Secretary will write letters supporting the need to deal with dumping and to increase tariffs, but, when it comes to reality rather than rhetoric, is part of a Government who are one of the ring leaders in the EU Council preventing any increase in tariffs?

[Ms Eagle]

I thank my hon. Friend for that observation. I think that in this debate Opposition Members will want to explore the gap between the Government’s rhetoric and the reality of their actions, because all too often we find that the gap is far too wide.

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[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.

[Tom Blenkinsop]

My hon. Friend is absolutely right. The point is that this is not an example of free trade. China is in breach of World Trade Organisation rules, and it is exploiting export subsidies to such an extent that the Americans are looking at tariffs of more than 200% on Chinese steel. That is not unprecedented: back in 2004, the Bush Administration brought in similar tariffs of about 25% on European steel.

[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.

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[Sajid Javid]

I can confirm all that to my hon. Friend, who makes his point very well. The rules are applied to all members of the European Union. The tariffs are set after an evidence-gathering process by the EU Trade Commissioner. Clearly, we all want them to be based on evidence so that it can be used to create the level playing field that we all want. My hon. Friend is correct to say that no single country can choose to change a tariff; we must work collectively through the EU rules.

Removing the lesser duty rule would have an impact. We want to address the impact of unfair trade without imposing disproportionate costs on the wider economy. We want to create that level playing field rather than a protectionist barrier. As I have already said—I am happy to say it again—where the evidence suggests it, I want to see the highest appropriate duties imposed. On rebar, which the hon. Member for Cardiff South and Penarth (Stephen Doughty) mentioned earlier, the UK industry is asking for tariffs of 20% to 30%. We support that and think that the evidence backs it, but I will never call for any action that could damage British business and hurt British consumers.

The hon. Member for Wallasey (Ms Eagle) called for an examination of the implications of granting market economy status to China. The Commission has not yet published its proposals, but, even if China is granted market economy status, the EU will still be able to take action on unfair trade practices and impose anti-dumping measures. After all, Russia has market economy status, and the EU has taken anti-dumping measures against Russia. Nor would market economy status affect the EU’s ability to tackle Chinese subsidies through anti-subsidy actions. In fact, the Commission has said that it wants to make it easier to tackle subsidies through trade defence measures.

It is clear that the Commission can do more within the existing rules, and I am doing everything I can to make sure it does so. That is why the UK has led the way in calling for more effective action. It was the UK that demanded and secured an extraordinary meeting of the Competitiveness Council to agree a European-wide approach to the crisis. It was also the UK that lobbied for an investigation into rebar dumping. We have been pressing the Commission to speed up its investigations into dumping so that appropriate steps can be taken as soon as possible. We have written to the Commission with specific proposals. We have voted to take action on seamless pipes and tubes, wire rod and cold rolled products. We have supported the Commission’s investigations into hot rolled flat products, and just last week I personally raised the issue with China’s Commerce Minister when he was in the United Kingdom.

[Tom Blenkinsop]

If what the Secretary of State says is true, why does the director general of Eurofer, Axel Eggart, state:

“By blocking the lifting of the Lesser-Duty-Rule, these Member States”—

including the UK—

“deliberately deprive the European steel sector of the chance to receive effective and legitimate remedy against massive dumping”?

Why does the Secretary of State think that the representative of the entire steel industry in the European Union says that?

[Sajid Javid]

I think I have already answered that question. We have been working closely with the industry to deliver as much support as possible. At October’s steel summit, the industry had five asks of the Government. Today, I am pleased to say that we have already delivered on four of them. Let me take this opportunity to thank my colleagues the Minister for the Cabinet Office, the Minister for Small Business, Industry and Enterprise, and the Commercial Secretary to the Treasury for their unstinting work.

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[Sajid Javid]

I think those numbers are right. Well over 90% of the steel was British, and that is exactly what we want to see. National Rail is using 98% British steel in major infrastructure projects, and more than 95% of the products used in the Crossrail project—the largest infrastructure project in Europe—are British. That is exactly what we all want to see.

[Tom Blenkinsop]

The question of how the tariffs are calculated is intriguing. China is in such breach of the World Trade Organisation rules that the calculation has to be based on Turkey as a model. Whether the tariff is 20% or 30%, the figure of 66% is a guesstimate, and the true number is probably far larger. It would be interesting if the Secretary of State could have dialogue with his European counterparts about that. We are talking about a problem that is far larger than the calculations suggest, and there is no information available because China is in such breach of WTO rules.

[Sajid Javid]

That is why we need to use whatever evidence is available. That means working closely with the industry, listening to it and taking note of its evidence. If the industry is saying that the right level is 20% to 30%, it is worth listening to that.

We have provided support packages worth up to £90 million for communities affected by plant closures in Scunthorpe, Redcar and Rotherham. The help on offer includes retraining, support for local companies that want to take on former steelworkers, and emergency help for workers who find themselves in a financial crisis. Earlier this month, Lord Heseltine announced the creation of an interim body for managing the former SSI site in Redcar, to ensure that it reaches its full potential. Lord Heseltine is also conducting a review of inward investment in the Tees valley, as well as looking at how to enhance education, employment and skills in the area.

As for the plants that are still operating, we continue to work with the Scottish and Welsh Governments and with individual companies on their specific needs. For example, we have repeatedly made it clear that we want the blast furnaces to carry on at Port Talbot, and we are working with Tata and the Welsh Assembly Government to help to make that happen. Although this remains an uncertain time, it is encouraging that Tata Steel Europe has announced that Greybull Capital is its preferred bidder for the purchase of the Tata long products business. That is a positive step. The negotiations are a matter for the companies involved, but we remain in regular contact with Tata about its future plans. If it is successful, the sale is likely to involve some element of state financial support, on commercial terms, for the new owner.

We have set up a joint Government and industry steel council to take remaining actions forward and to work through the conclusions of an independent study into the competitiveness of the UK steel sector. I will co-chair the first meeting of the steel council on Wednesday.

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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.

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[Kevin Foster]

It was interesting to hear those comments, which sounded very similar to the comments from the Government that the hon. Lady has been attacking.

[Tom Blenkinsop]

The hon. Gentleman has been making some interesting points. However, I believe that the contract for the bridge was originally given to a Spanish firm, which had to pull out. Cleveland Bridge came back in, and made sure that the contract used Tata steel from Motherwell and Dalzell. Those two plants are on the verge of closure, but they also make the sonar-specific plate that will be used for the renewal of the four Trident submarines. The contract is integral to both sites.

[Kevin Foster]

What the hon. Gentleman has said proves yet again that there is not just a massive security argument in favour of building the four Successor submarines, but a considerable economic justification. In south Devon, I can look at the site in Plymouth where the submarines are being refitted. [Interruption.] It is always lovely to have an accompaniment from the Opposition Benches. I hear it regularly, and I thoroughly enjoy it.

The hon. Gentleman’s intervention has made clear why it is so vital to build those submarines. I look forward to his joining me in the Lobby when we vote on the issue, although we know that the people whose jobs rely on the Trident contract can expect absolutely no support from the Scottish National party.

We can do a great deal more when it comes to procurement. The Hinkley Point project, for instance, will create a huge number of jobs in the south-west. We need to create an infrastructure that will meet the demand. I hope that a significant amount of British steel will also be used in the construction of the Stonehenge road tunnel.

It has been interesting to take part in the debate, and to listen to some of the comments that have been made. I find it particularly interesting to hear demands for unilateral action from those who, like me, argue for us to remain in the European Union. Membership of the EU has many advantages, but unilateral action on tariffs is not one of them. However, 28 of us, working together, can make more of a difference.

I shall not be supporting the Opposition motion, which will probably not come as a huge surprise, given some of the arguments that we have heard. I think it is right that the Government are playing a proactive role in the European Union to prompt action and to modernise their own procurement rules to ensure that we can defend our own industries, but also to ensure that, for our own projects, we buy as much British steel as we possibly can, respecting the fact that our country would not believe in state aid even if we were committed to it under European rules.

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[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

There are a lot of issues that we could talk about today, including the Government’s unilateral introduction of the carbon price floor tax on energy intensive industries, but I will not go into that now. I have beaten that drum many times in this House. We could also talk about procurement contracts or business rates, but the two elements that I want to focus on are the lesser duty rule and Chinese market economy status. Those two issues are of primary concern to the UK steel industry.

Today at the Competitiveness Council in Brussels, industry Ministers from across the EU are discussing actions actively to support the European steel industry, to enable the sector to compete on a fair and level playing field within the global market. This meeting follows the extraordinary Council meeting on steel that was held on 9 November last year and the High Level Conference on 15 February this year. Today’s meeting is the last-chance saloon for this Government and our steel industry. Only last week, for example, the chief executive of Tata Europe, Karl Ulrich Köhler, quit the company. We have to bear that in mind and try to determine what it says about Tata’s future in the UK. The tsunami of underpriced, unfairly traded steel, most notably from China, is destroying the steelmaking capacity of the UK and the EU.

This brings me to the primary point at issue. In order to retain virgin steel production in blast furnaces in the UK, we must deal with two immediate threats if our nation’s steel industry is even to stand still. Those threats are the lesser duty rule and Chinese market economy status. Europe currently uses the lesser duty rule to impose the lowest possible duties on unfairly traded products that have been dumped in European markets. That means that duties introduced by Europe are usually way below the actual margin of dumping. The result is that the dumping continues and unfairly traded products are allowed to compete in European markets and depress prices.

The United States does not follow the lesser duty rule, which means that it can implement much tougher sanctions that reflect the actual margin of dumping. For example, the US recently imposed duties of 236% on a particular grade of Chinese steel. Furthermore, the US Government are in the process of introducing new laws that will enable the US to take even tougher action against Chinese dumping. The consequence for Europe, and for the UK in particular, if we do not take action as a European Union and if the Government actively prevent the EU from improving our standing, will be to exacerbate the amount of Chinese dumping in our domestic market and in our own EU market. It will actually affect our own exports, never mind our ability to look after ourselves.

The director-general of Eurofer, Axel Eggert, has stated:

“By blocking the lifting of the lesser duty rule, these member states deliberately deprive the European steel sector of the chance to receive effective and legitimate remedy against massive dumping. It is member states with steel production and jobs that continue blocking an agreement within the EU Council to remove this outdated rule.”

He goes on to state:

“It is most notably the UK”.

[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—

[Mr Iain Wright]

And Hartlepool.

[Tom Blenkinsop]

We have Hartlepool tube mill. We have a fantastic story to tell and we want further investment there. By granting MES, we are putting at risk not only steel, but our vast chemical processing industry in the Tees area. Energy-intensives, be they ceramics, chemicals or steel, are at real risk. We cannot afford to be duplicitous on any potential contract, be it a defence, construction or export one, but that requires a Government to make policy that defends their own British steel industry.