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UK steel industry groups are calling for swift action to remove tariffs on exports to the US after the two governments opened talks, though wider concerns remain about Westminster’s lack of engagement with the troubled sector. 

A joint statement by the UK and US governments last week signalled the start of discussions on tariffs affecting steel and aluminium trade. The Trump-era measures, introduced in 2018 as a means to protect domestic producers, place 25% and 10% tariffs on UK steel and aluminium exports respectively.. 

In October last year, US President Joe Biden reached an agreement with the European Commission to remove the tariffs on EU steel exports up to a certain value, based on historic trade volumes, effective from January this year. 

However, with the UK having left the EU in the interim, the tariffs still apply to British exports. 

“The EU’s deal means they are enjoying a 25% price advantage over UK producers which is unsustainable and threatens jobs,” says Alasdair McDiarmid, operations director at Community, a multi-sector trade union that represents iron and steel workers. 

“The US is supposed to be our close ally and securing an exemption from these tariffs is well overdue. Government needs to sort this and join the US and EU in discussing measures to protect steelworkers from global steel overcapacity.” 

McDiarmid adds that the start of talks “is welcome news but the talks must proceed at pace to limit damage to our steel industry”. 

Gareth Stace, director general of industry group UK Steel, says the tariffs have already reduced UK exports to the US by nearly 50%. 

“That a few weeks into 2022 a resolution appears to be in sight is hugely welcome news to the steel sector and steelworkers across the UK,” he says. “Given the competitive disadvantage created by the EU deal, it is vital that these talks are concluded swiftly to limit any additional damage to UK producers.” 

The UK’s biggest union Unite’s national officer for steel, Harish Patel, warned in December that without a speedy agreement “hundreds of jobs in the steel and associated industries… are at risk”. 

The joint government statement says the industries have ultimately been harmed by excess steel capacity “driven largely by China”. 

Global steel production capacity has outstripped demand for many years, but according to the Global Forum on Steel Excess Capacity – an international alliance comprising eight of the 10 largest steel producing countries, though not China – the situation significantly worsened during the first year of the pandemic. 

EU trade commissioner Valdis Dombrovskis said in October 2020 that “plummeting demand” had exacerbated the problem, and vowed to launch multilateral efforts to eliminate subsidies and cut overcapacity. 

UK Steel’s Stace says any UK-US agreement should build on the deal struck with the European Union, adding: “We hope that the US and UK negotiators work together in a spirit of cooperation to deliver a deal and remove these unnecessary barriers to trade. A good deal is in everyone’s interests, not least US and UK consumers.” 

The joint announcement says the lifting of retaliatory tariffs imposed on US exports to the UK will also be discussed. 

 

UK inquiry response a ‘huge disappointment’ 

The tariff dispute takes place against a backdrop of wider concerns over the UK’s steel industry. 

A November inquiry by the Business, Energy and Industrial Strategy (BEIS) Committee, a cross-party group of MPs, called for urgent government action in several areas. Industry groups are unimpressed with the government’s response to the inquiry, published last week. 

Though there has been progress on the US tariff issue, which the committee said could cause “significant injury to UK steel producers”, Community says the response to other committee concerns is “hugely disappointing… from a government apparently determined to kick the big issues down the road”. 

The committee had raised urgent concerns over high electricity prices, which it says are hindering the ability of UK steel producers to compete internationally, and are deterring inward investment into the sector. 

Noting that UK producers were facing some of Europe’s highest electricity bills even prior to last year’s price surges in the energy market, the committee called for action to reduce costs and alleviate “an immediate crisis”. 

Short-term bailouts, though potentially necessary, must not come at the expense of a longer-term strategy to boost UK producers’ competitiveness with those in France and Germany, it said. The alternative is “long-term decline and future crises”. 

In its response, the government said it is determined to support energy intensive industries, citing £600mn given in electricity cost relief to the steel sector since 2013. 

It also stated that officials hope to build a home-grown renewable energy sector to reduce reliance on fossil fuels and exposure to “volatile” global gas prices. 

However, no new measures were proposed, and the response has been derided by Community’s McDiarmid as “lip service” rather than action. 

“The cross-party committee rightly found that to safeguard the future of our industry the government must deliver a long-overdue steel sector deal and take urgent action on exorbitant energy prices,” he says.  

“The failure to engage with these crucial recommendations represents another missed opportunity for government to demonstrate their commitment to British steelworkers and our strategically important industry.” 

The inquiry had also addressed controversial trading and financing arrangements used by GFG Alliance companies, a network of metals companies linked to Sanjeev Gupta. 

The group’s use of circular and related-party trades to source liquidity, its use of future receivables financing and its convoluted corporate structures were raised by the committee, though the government noted those issues are already being probed by other public sector bodies.