Why a 250% Steel Tariff is Fair 70


My recent post on Sajid Javid’s deliberate collapse of British Steel was shared on Facebook by over 1,300 people. Tweets far exceed that.

There might therefore be interest in a little more explanation on tariffs and subsidies, and particularly why the United States has slapped an anti-dumping tariff of 256% on Chinese steel.

As I reported, the Chinese state subsidises steel exports up to 72%. That means that steel that cost 100 yuan to make, is sold abroad for 28 yuan. If you apply a 256% tariff to 28 yuan, the resulting cost of that steel is 99 yuan.

Which proves both that the 72% figure my British diplomatic contact gave me is also about what the US authorities are working on, and that 256% is a fair tariff, massive though it may sound.

A 256% tariff is needed to counteract a 72% subsidy.

By contrast, the 13% tariff which is the maximum Sajid Javid instructed UK diplomats in Brussels to accept, would increase the price of 100 yuan worth of steel from 28 yuan to 31.6 yuan, still leaving a 68.4% effective subsidy.

Sajid Javid took the view, and stated it directly, that getting the cheap dumped steel from China was better for the economy than having a British steel industry. Javid told MPs:

“If duties get disproportionate it would have an impact in Britain and elsewhere on consumers of steel. Those businesses tell us it will cost jobs and exports if duties got out of control…

“To go further might in the short term look the right way to go to protect industry but you have to remember in Britain there are also companies that consume steel as part of the production process.”

In my view it is a ridiculously short term view to rely on dumped steel effectively to subsidise British steel consumers. But Javid was at least honestly setting out his Thatcherite doctrine.

What is the rankest hypocrisy is for Javid now to pretend to care about the British steel industry when he has been ordering officials for a year to pursue a policy on tariffs he knew would lead its closure.

There are two strands of immediate action which the British government should now take. The first is to bring Tata Steel immediately into public ownership. The second is to consult urgently with the EU Commission and other states on a realistic tariff against dumped Chinese steel. As the UK had been the main opponents to this move, early progress should be possible. The better answer would be to secure a reduction in subsidy by the Chinese government, but an emergency tariff might be needed as an initial move.


70 thoughts on “Why a 250% Steel Tariff is Fair

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  • Andrew

    Craig, why do you want to make steel at a loss? By doing so, you will just turn Tata Steel into an open-ended social programme, at enormous cost.

    Surely it would be better to take some of that money and retrain (and possibly, if desired by the families, relocate) the Welsh steel workers and their families.

    Apparently, this is not a cyclical problem exacerbated by Chinese dumping which will get better when demand for steel picks up again. It’s been decades in the making. We simply can’t compete with much larger, low-cost Chinese plants in producing basic steel products – even British factories prefer to buy cheaper foreign steel. (Specialized steel products are another story but I don’t think Port Talbot makes them).

    The Chinese subsidies are a distraction. Even without them, China has cornered the market in basic steel production with the sheer scale of its investment in this industry. Faced with this reality, we should try to come up with a creative solution for the people affected – help them to cope with the short-term adjustment and give them opportunities to realize their potential in ways they couldn’t dream of as wage slaves for Indian billionaires.

    (Incidentally, the City remains a world-class banking and insurance centre, making billions for the country, unlike the steel industry).

    • lysias

      2007-8 shows how dangerous it is to rely on the financial industry, especially exclusively.

    • RobG

      Andrew said: “Incidentally, the City remains a world-class banking and insurance centre, making billions for the country, unlike the steel industry”.

      What?! Whilst it’s true that the City of London vastly inflates the UK’s GDP, the fact is that most of this so-called ‘economic activity’ comes directly from crime and warfare. These feckers in the City don’t pay any tax, are guilty of crimes against humanity on a vast scale and are total parasites on the UK and the wider western world.

    • Yossi

      If the City bankers are making billions make them pay back the bail out money in full and with interest.

    • craig Post author

      Andrew

      It is only being made at a loss because the Chinese steel is being sold at an extreme loss.

      I have always viewed the Thatcherite doctrine that it is no necessary for anything to be actually made in the UK, as self-evidently mad. I have never changed that view. The entire country cannot be a casino.

  • nevermind

    Subsidies are the real killer of the neocons globalisation because they skew the market something rotten, transfer instabilities as well as unsustainable practises, devaluing those real sustainable practises that work.
    @ Bevin, thanks for the resume, so important in some of the discussions.
    It looks like those few who voted with the blue rinse brigade and knew how to fill out forms deliberately wrong, are dictating life to us all now.

    Hail to those pioneers who gave the occupied territories in Germany their proportional voting system…. Guess what, it works well for voters, maybe you should try and condition your party politicians into acting pro democracy, pro fair votes….

  • Hieroglyph

    There is actually a serious ethical reason to have tariffs on Chinese steel – their slave labour. Ok, it’s not slave labour strictly speaking, but the conditions they work in are Victorian era, no matter how many smug Apple PR people say otherwise. And, that’s just in the telecommunications sector, imagine how bad it is in the steel industry? There is a reason stuff is made cheaply over there, and it isn’t their dynamism, efficiency, and love of neoliberal economics …

    As to bringing Tata into public ownership, or consulting the EU, there is precisely no chance. Truth is, many of these neocon crazies are simply not that smart, have serious cognitive disorders, and are corrupt as all hell, so reasonable solutions are totally beyond them. UK Parliament is quite clearly full of these basket cases, and Agent Cameron is miles too enmeshed in the system to do anything about it, and may indeed be a basket case himself. No, Corbyn is our only hope here, if the Blairites don’t do him in this year. I think they will sadly, this summer, and to oblivion they will go.

  • giyane

    Andrew
    South Wales is beautiful and its people are robust and industrious. London politicians have treated their Celtic neighbours dreadfully, followed by their continental neighbours, followed by Eastern European, Russian, Middle Eastern, African, far Eastern and Antipodean.

    The deliberate wrecking of Afghanistan, Iraq, Libya, Syria, Somalia, etc demonstrates a fundamental spiritual dysfunctionality in the Anglo-Saxon mind. A love of political lying, i.e. hypocrisy to cover up their wreckless depravity.

    The Chinese were sabotaged by our opium wars and they are not going to be soft on us. It’s payback time, but the payback is going to be paid by Celts, not London politicians. Look at how this country has set its disaffected Muslim youth against their fellow Muslims in Syria. How do they manage that?

    The problem is not steel, the problem is illegal wrecking of nations. Steel is the consequence and the war on terror will have its due consequences in due course. I know because I lost a nice job chauffeuring executives for telling them there would be consequences for carpet bombing Afghanistan and Iraq.

    They don’t like it up ’em. All the more reason to shaft them – hard – when the consequences emerge.

    This government should be ousted, along with Blairite New Labour, not for opium wars of China, but for never taking heed of the lessons of history, namely that Hitler’s fascism nearly beat us and would have done if not for Russia and half the rest of the world we had no reason to hope for any assistance from, with our record.

    What will happen instead? Built into our democratic system is the alcohol- accelerated digestive tract by which no politician sticks around long enough for any shit to stick. We are a disgusting, immoral bunch of criminals who deserve to be hung out to dry like baited magpies on a barbed wire fence.

    Let the bastard politicians squirm out of this one. No steel to make bombs with. It makes you want to cry.

  • giyane

    Come on trolls, just let this self-hating Anglo-saxon exercise his Cromwellian right to free speech, and by breakfast time he’ll have re-grown his stiff upper lip.

  • giyane

    Hieroglyph

    Cameron may be a basket case ?

    So far the swivel-eyed foaming warmonger has dismantled Libya and Syria. Am I missing something here? Were there too many wogs in the world before these events? Well done Cameron, boy, you’ve pooped your pants in class. That’s what I call smart Tory thinking. You’ll go far. Take the rest of the day off, best Prime Minister in the making, blah blah blah.

  • lwtc247

    Craig.
    I think your ‘economic explanation’ of this is frankly, ridiculously simplistic and inapplicable on many levels.
    For example, did you know China sources huge quantities of high grade yet cheap iron ore from Australia and Brazil, iron ore that is also available to the EUUSUK. {China’s domestic ore is pretty low grade}. No ire towards them?

    If one believes in the concept of nations, is it so wrong of national government to take measures in promotion of
    an industry that it seeks to support/develop across the world? If it were the British govt doing it, I suspect you’ve have a different tone. Did you every promote British industry/commerce while in the FCO?
    The “developed” nations have been doing this market manipulation for ages. It wasn’t so long ago that the US was imposing steel tarffifs on the UK (amongst others). Remember this: http://www.theguardian.com/world/2003/dec/04/usa.wto1 – it was practically headline news for some time, The US only scrapping them when the EU threatened retaliatory action.

    None of this sprang forth from a vacuum. A large part of the problem is that it has been allowed to get to this stage, presumably by horribly overpaid uncaring managers/directors in the company that were well enough off not to be too concerned about finding a job later on if need be, and financially astute vultures who saw the prospect of a tasty meal in wait.

    Taking Tata into public ownership is probably the most minor good option by a nation in debt (to whom?) under a govt that WILL sell it for peanuts to its buddies should it ever become profitable. Far better to buy those AUS.BRA ore companies!!

    Sorry to say, but to me, your whole post has more than a trace of “anything goes” because its “the Chinese”. You emulate something akin to what the BBC trots out every day against China.

  • Old Mark

    Good links from YKMN and Tom Welsh.

    The doctrinaire market fundamentalism of Javid & Osborne must seem a bad joke to the PRC which, like Japan since WW2, and the Germany and the US of over a century ago, apply a pragmatic protectionism to their industrial base which in every case (Germany & US pre 1914, Japan since 1945, and PRC since c1980) has seen these states increase global market share and wealth at the expense of states that subscribe to’free trade’ .

    The extent to which HMG is compromised by its desire to keep the PRC sweet re the Hinckley Point deal must also be a factor in Javid & Osborne’s supine refusal to even consider retaliatory tariffs.

  • Tom Welsh

    By the way, were you aware that the UK today imports about 40% of its food? Consider applying the argument “what if the foreigners wait until we are dependent on them and then pull the plug” to that state of affairs?

    • John Spencer-Davis

      I have always been a great enthusiast for a siege economy. I consider it a first priority to be able to feed, clothe and house the population at a basic level, for the simple reason that it would allow us not to be held to ransom by the rest of the world, or rather, by loci of power that have the resources to operate internationally. As it is, let’s say Corbyn, or someone like him, is able to form a government, a loss of business confidence can royally screw up any basic proposed changes to the distribution of power. That would be much more difficult, if the population was able to weather any economic attack. I am dreaming.

  • Andrew

    I was wrong about the British steel industry not making billions for the country (April 2, 20.47). Surprisingly, Britain exported about £5 billion of steel products in 2013, while importing £2.6 billion, resulting in a steel trade surplus of £2.4 billion.

    Almost half our exports went to the EU, with Germany and France as the largest buyers, while nearly 30% went to Asia (China??).

    Presumably, foreign companies bought British steel products because they were competitive in price and quality, despite a huge UK energy cost handicap – unless of course British firms were dumping steel on the world market just like the Chinese.

    In 2013, Britain consumed 10 million tonnes of steel mill products, down from a peak of 20 million tonnes in the mid-1970s.

    Less than half came from domestic steel plants – I wonder why. More than half was imported. The biggest foreign suppliers, in order of importance, were Germany, Spain and Asia (mainly China?).

    More steel facts and figures:

    http://www.eef.org.uk/uksteel/About-the-industry/Steel-facts/Trade.htm

  • Mike Parr

    In 2009 the WTO issued a report which green lighted border carbon taxes. The French love them (but cannot deploy them), others (such as the currnet UK gov) seem ideologically opposed to them. Yet such taxes would auto-rebalance the steel problem. Of course the Chinese would throw their toys around.

    The bald guy in the UK gov who pretends to be industry minister claims that Uk companies need access to cheap Chinese steel. Example follows.
    Gwynt y Mor is an off-shore wind farm in North Wales – couple of hundred MW, couple of hundred turbines using steel monopiles. Fluor provided engineering & was a risk sharing partner & decided to save money by sourcing the monoplies (steel tubes) in China. After north of 40,000 tonnes were shipped to the UK and they tried to install them it was “ooops” time – poor quality steel and Fluor had failed to undertake due diligence in China – good news for the lawyers – they made plenty sorting it out (& yes we are talking “send it all back”). Most stuff from China has very variable quality – it looks good because they employed in the late 2000s Japanese enginneers to sort out the finished “look”.
    Did a dumping case for the Chinese on nuts & bolts a few years back – they sell to the low end of the market – the high end – e.g. the automotive sector – wouldn’t touch them with a barge pole, as for the aerospace sector … they just laugh (at the thought of using Chinese fastners).

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