Steel: Preserving Sustainable Jobs and Growth in Europe

Tom Blenkinsop Excerpts

Tuesday 7th February 2017 General Committees

[Mr Hurd]

Okay. I am certainly interested to know more about that. It seems part of an ecosystem that we need to nourish in the future, because access to innovation and new ways of making and doing things will be critical to the sustainable future that we all want for this foundation sector.

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

I have a number of questions for the Minister, some of which stem from the dialogue we had with his predecessor back on 6 July 2016 in a joint sitting of the European Scrutiny Committee, the Business, Innovation and Skills Committee and the Energy and Climate Change Committee. The main issue still outstanding for me is on trade defence measures. I asked the Minister’s predecessor about China playing by the rules and wishing to acquire market economy status. I asked whether it was

“the Government’s policy, whether we are in or outside the EU, to grant China market economy status. At the moment, China, of course, loses $35 per tonne of steel it produces.”

Of course, we are talking about the Chinese state, because it owns the Chinese steel industry, which is unlike the case of any of our other competitors. I said to the Minister:

“You support the Commission’s strategy for bilateral and multilateral discussions to tackle overcapacity in the market. What specific measures so far”

could she give as evidence to demonstrate that China was

“playing by the rules and reducing that overcapacity”,

or was it playing by its own statements? All the evidence showed that it was ramping up capacity.

[Mr Hurd]

I thank the hon. Gentleman for that question. Indeed, may I pay tribute to him for his persistence on this subject? There is rarely a moment when we discuss steel when he does not raise this issue personally. Since the referendum, the Government’s objectives have not really changed: our priorities are to maximise the benefits to the UK from international trade, honour our international obligations, and take effective and proportionate action to tackle unfair trade where it arises.

The hon. Gentleman has followed more closely than I have over the years the conversations at EU level about China and market economy status. Clearly, there continue to be major misgivings about that and the continued actions of the Chinese, which is why they do not have the status, which is why they are in dispute. He will know as well as I do that before Christmas, the Commission published a proposal for a new anti-dumping methodology that will cover countries with market economy status and those without it. That proposal is well worth serious consideration, and that is what we are giving it. We want to understand the associated impacts of that. We are looking at that seriously, because it looks like a sensible response to the issue we face.

I come back to the point I made in my statement: overcapacity is a global issue. It is a major issue for the EU, but it is a global issue, which is why I think the initiatives through the G20 steel forum are important.

[Tom Blenkinsop]

I thank the Minister for that response. At about the time of that conversation with his predecessor, it was the Government’s policy to support market economy status for China. Is that still the case? Will we support that, through European channels, while we remain a member of the European Union, and until Brexit? Will we support Chinese requests for market economy status, post-Brexit? Following on from that, European funding will obviously no longer be available post-Brexit; what are the Government’s plans on trade defence mechanisms? While we remain a member of the European Union, we are subject to mechanisms that we have, in the main, opposed. What do the Government intend to have happened by this time in 2019, as regards those mechanisms?

[Mr Hurd]

On China’s market economy status, I do not have much to add to what I said. Our focus is on examining the Commission’s proposal, which we think is a sensible response to the situation. That is not without its difficulties, because there are different views in the European Council and in the Parliament, so that politically will be a challenge. However, that is where our focus is.

As for the future, post-Brexit, it is difficult/impossible for us to give the forward visibility and certainty that I understand Members want. We are where we are on that. My colleague the Secretary of State for International Trade is leading the work on future trade protection plans, and those will become clearer as we go through the Brexit process.

As I general point, I hope that we have made it clear through the industrial strategy, which is very much interlinked with the Brexit strategy, that this is fundamentally about how we strengthen the competitiveness of the British economy and important sectors within it. The hon. Gentleman knows from the conversations we have had that, within that, the steel sector is extremely important.

As I said in my statement, we have taken active steps to try to help the competitiveness of the sector through a difficult situation. There is more to be done, not least on energy costs, which I am sure we will get to, but I want to try to give the hon. Gentleman some reassurance. As we look to the post-Brexit future, although, naturally, I cannot give him the certainty and visibility he is pressing for, I hope that he takes some reassurance from my saying that we will not do anything stupid to undermine the competitiveness of the economy at this pivotal time. We have to get this right, which is why we need more time to think it through.

[Tom Blenkinsop]

One last question, if the Committee allows. On the Minister’s predecessor’s comments about outright opposition to any changes to, or retraction of, state aid rules in respect of rescue and restructuring regional aid for the steel sector, what are the Government’s views on those issues, given the debacle at Redcar only two years ago?

[Mr Hurd]

While we are a member of the EU, we play by the EU rules, and we try to be as creative and intelligent in playing that system as anyone else. As I said in my statement, we have managed to release funds in quite a strategic way. I make no comment on the past, because I was not involved in that process. Looking beyond Brexit and at the Government’s approach to using public money to support the competitiveness of key industries, that is work in progress, but the industrial strategy Green Paper is the first step.

--- Later in debate ---

[Mr Hurd]

I agree with my hon. Friend. The only thing I would add is that currencies move. Therefore, this is not necessarily a structural shift that we can rely on. It has provided some relief and some offset not only for the auto sector, but for the steel sector, as hon. Members who represent steel seats, if I can put I that way, are well aware. The message that I get from chief executives of steel companies is, “Yes, it is helping.” The picture is complicated because some input prices have increased, but either way, we cannot rely on that completely as the long-term solution for the steel sector. The sector is facing other big, structural issues, not least the massive, deep-seated problem of structural overcapacity, which we have to address. Arguably, that is even bigger and more fundamental than the issues raised by Brexit.

[Tom Blenkinsop]

Added to that, before I get to my question, there is an assumption—this was implicit in the previous question—that an object passes across a national boundary once, but of course, a tariff could be added multiple times depending on how many times the product has to go over national boundaries.

I want to revisit a question I have asked before—I asked this question to the Minister’s predecessor—on the Government’s opposition to any relaxation of state aid rules in respect of rescue and restructure and regional aid for the steel sector in the interim before we get to a change of situation in 2019. The Government said that they have

“reconsidered the arguments for relaxing the rules for steel in respect of both rescue and restructuring and regional aid. However, we are concerned that, in the context of global excess capacity”—

which is still there, of course—

“if Member States were able to offer rescue and restructuring aid, this would simply depress prices and allow inefficient plants to continue to the detriment of all.”

Of course, in that window of time, the second most efficient plant in the European Union closed—namely, Teesside Cast Products in Redcar. Does the Minister believe that that position is still logical, given the results?

My second point relates to previous rescue plans, which have worked, of course. Redcar was saved once before. Dalzell was saved as a result of Scottish Government and national Government action. There is also an argument about the saving of Scunthorpe steelworks. A mill is a lot easier to save than an integrated steelworks, but without any slab to squash at a mill, there would not be any product to squash. That shows exactly the integrated nature of steel, or rather, its British nature—rather than English or Scottish.

What lessons have the Government learned from those plans? We have seen Greybull come in and save the old long products division of Tata; Tata itself has changed its position through good interaction with the Government and trade unions, and Liberty, of course, has stepped in in a number of plants across the UK. What model have we learned from them? What lessons can we learn for a post-Brexit Britain that we can take forward and build on? What processes are the Government putting in flow to make sure that we have a materials strategy to develop a UK steel industry and attract further investment around our expertise, which is widely known across the world?

[Mr Hurd]

I thank the hon. Gentleman for a typically thoughtful intervention. On my predecessor, I think she was always logical, at least in her own mind. As for the state aid strategy, I come back to what I was saying before: we have to work through the whole set of complex, challenging Brexit issues and see where we come through, in terms of our ability to make funds available, and our strategy to support the competitiveness of our industries. That is clearly work in progress.

On Redcar, I recently had the privilege to visit the site. It was one of the most memorable and impressive ministerial visits I have ever been on. I was enormously impressed by the scale of the site and the industrial landscape that it sat in, and the clear sense of opportunity that still resides there, as well as by the people I met—not just their resilience in coping with a seismic shock, but how they had moved on from that into a determination to secure an attractive future for the site and the area.

The hon. Gentleman knows that my Secretary of State was born and bred in that area. We are determined to play what part we can in supporting a cost-effective regeneration of the site. There is clearly plenty of potential there, and plenty of players who are looking at that site and saying, “We want to be part of that. We have a vision for that site. We can see how we can regenerate it.” There are deep complexities associated with it, in terms of the costs of cleaning it up—the hon. Gentleman knows that—and there are complexities relating to charges that the Thai banks have on that, but there is a group of people who have our support and who are determined to work through all those issues. That visit simply further galvanised me into making sure that we play our full part in that process, however difficult the challenge. The site has enormous potential to be reborn as a generator of great jobs.

Motion made, and Question proposed,

That the Committee takes note of European Union Document No. 7195/16, a Communication from the Commission on Steel: Preserving sustainable jobs and growth in Europe; and notes the action taken by the Government to secure a sustainable and competitive future for the steel industry in the United Kingdom.—(Mr Hurd.)