A last-minute decision by the UK government to extend tariffs on steel products could be vulnerable to a challenge at the World Trade Organization, trade lawyers say.
Liz Truss, international trade secretary, overruled the Trade Remedies Authority, a state body that adjudicates on Britain’s trade policies, which found no evidence to justify continuing some emergency measures.
The TRA found last month there was insufficient evidence to maintain 25 per cent tariffs on nine steel product categories, while recommending the UK retained them on 10 other categories.
Domestic steel producers described that original decision as a “hammer blow”, leading MPs to protest about the prospect of a flood of cheap of steel imports costing jobs.
Truss, who was also heavily lobbied by business secretary Kwasi Kwarteng, decided to extend the tariffs on a total of 15 products, removing them on only four.
Under the 2018 legislation that originally set up the TRA, Truss was only allowed to accept the body’s recommendation in full or reject it — which would have caused all tariffs to end automatically at midnight on June 30.
Instead, she passed emergency legislation to enable her to amend the TRA proposal.
However, trade experts said the UK’s decision could be subject to a challenge at the WTO. While the tariffs were WTO compliant when the EU imposed them three years ago, the UK would have to provide evidence its own steel industry was suffering from imports.
There was a risk that a big exporter of steel to the UK, such as Turkey, could lodge a complaint at the WTO, they said.
Sam Lowe, trade expert at the Centre for European Reform, said the TRA’s ruling against extending the safeguards “could certainly be part of a country’s challenge at the WTO”.
However, he pointed out that such challenges “took ages”, while Truss’s decision only extends the tariffs on the five additional categories by a further year.
One trade lawyer also pointed out that disagreements between member states means there is no functioning appellate body at the WTO to adjudicate on disputes. So WTO rulings are often not enforced.
UK Steel, the industry trade body, said it believed the decision “was within WTO rules”. It added: “In the categories extended by the secretary of state, there was a threat of injury and an increase in imports had safeguards not been implemented.”
The decision by Truss was a humiliation for the TRA and was seen by people close to the trade body as evidence that the Conservative government had become more “interventionist” in the Johnson era. Oliver Griffiths, TRA chief executive, told the Financial Times last month that he expected far fewer defence actions against imports as the post-Brexit UK opened its economy to the world.
A person with knowledge of the TRA said it also feared a WTO case would find against the UK.
“The government’s decision speaks for itself. It is a very different government to the one in place two years ago. It is interventionist,” they said. Consumer prices could rise because of the tariffs particularly for tinned food, they added.
The person said the TRA would maintain its independence and continue to take decisions based on the facts.
But Truss last week said she would review the TRA’s role to give her greater freedom to intervene with tariffs to protect vulnerable industries from a surge in cheap imports.
“The trade remedies framework was first introduced in 2018 under the previous government,” Truss said in a written Commons statement, referring to Theresa May’s administration.
“The current government will review it to ensure it is up-to-date, champions WTO rules and is fit for purpose in the post-Covid world. It is crucial we have the tools in the future to ensure industries are defended against unfair competition and unforeseen surges in imports.”
Simon Walker, TRA chair, said it provides “impartial recommendations to government, based on careful analysis of the available evidence.
“In this case, as for all our investigations, we have worked within the trade remedies legal framework set out in UK legislation and regulations. But it is for ministers to make the final decision.”
A spokesperson for Truss said the extension was only for an initial 12 months and made “in the context of exceptional circumstances”.
The measures were “proportionate and justified in the face of unique market conditions”. They would allow time for “new evidence to be taken into account” and demonstrated the government’s “commitment to ensuring UK firms continue to operate under free and fair trade”, the person added.