The UK on Wednesday night introduced emergency legislation to protect domestic steel producers from a flood of cheap imports, ripping a hole in the government’s post-Brexit trade regime.
International trade secretary Liz Truss bowed to fierce lobbying by the British steel industry to over-rule the new Trade Remedies Authority, an arm’s length body only set up on June 1 to make recommendations to ministers on trade safeguards, such as tariffs and quotas.
Truss’s intervention followed pressure from Kwasi Kwarteng, business secretary, and warnings from the UK steel industry that removing tariffs on a wide array of products would be a “hammer blow”.
The TRA recommended on June 11 that of the UK steel safeguard measures covering 19 product categories, 10 should be extended for a further three years while nine should be revoked.
Under the existing legislation, Truss had no choice but to either accept the TRA recommendation in full or reject it — in which case safeguard measures for all 19 product lines would have expired on June 30.
Faced with warnings of job losses in a highly sensitive sector, Truss on Wednesday night introduced a statutory instrument — emergency secondary legislation that does not go via parliament — to allow her to amend the TRA proposal.
She will now extend the safeguard measures for 15 of the 19 sectors for an initial period of 12 months, having “reassessed” new data from the industry and concluding that only four could be safely removed.
Her decision is a major setback for the four-week-old TRA, although Truss’s allies insisted it would remain “robustly independent” and that the minister only intended to “tinker with the system”.
Truss said she would urgently review the trade remedies framework, which was first introduced 2018, “under the previous government” led by Theresa May.
“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,” she said.
Gareth Stace, director-general of UK Steel, a trade body, said prime minister Boris Johnson had stood up for the industry.
“The prime minister has said that he wants to take back control and today he has done just that and avoided a retreat from investment in our steelmaking, a reduction in the well-paid jobs that are part of the social fabric across the country and hampering any progress for government of levelling up.”
Sam Lowe, trade expert at the Centre for European Reform, said it was no longer possible for British ministers to point the finger at Brussels when it came to issues like trade or subsidy control.
David Henig, former trade negotiator, said: “Idealism meets reality. I’m not surprised this has happened at all: steel is one hell of a special interest.”
The steel safeguards, which were imposed in 2018 when the UK was still in the EU, meant that certain products were subject to a tariff of 25 per cent once a certain quota level had been passed.
The EU recently extended its steel safeguards for a further three years, prompting fears that the UK could be the target of steel dumping if it lowered its defences.
The UK steel industry employs more than 33,000 people directly and supports a further 42,000 in supply chains. Companies include Tata Steel, British Steel, owned by China’s Jingye Group, and Liberty Steel, owned by GFG Alliance.
The steel tariff decision emerged as the government published legislation setting out details of its new post-Brexit regime for government subsidies, which it said was designed to be “simpler and more nimble” than the EU’s state-aid rules.
In the new system, all subsidies under £315,000 would be allowed to proceed freely, along with assistance that fell into specially designed “streamlined routes” for delivering the government’s strategic objectives, such as reaching net zero carbon emissions by 2050.
Bodies seeking to award more controversial subsidies, as defined in secondary regulations that are yet to be published, could voluntarily refer their decisions for a non-binding opinion of a “subsidy advice unit” within the Competition and Markets Authority as to whether they were fair.
A third, most-sensitive category, would be subject to a mandatory review by the advice unit to examine whether a government body awarding the subsidy had adhered to the general principles set out by the government.
The government stressed that the unit’s reviews, which would have to be carried out within 30 days, would be non-binding, but would be published. Officials said they expected “dozens not hundreds” of such reviews.
Ultimately, any disputes would be settled in the UK courts or the tribunal system, which would take into account the findings of the advice unit.
Greg Clark, former business secretary, said it was right for Britain to take a more “agile” approach to subsidy policy. “If you’ve left the EU you should not act as if you haven’t,” he said.
James Webber, partner at law firm Shearman & Sterling, said the system looked “well designed”, allowing public authorities to innovate and “concentrate effort on whether subsidy is the right policy tool — not on compliance with detailed administrative rules”.
Others were more sceptical. Alexander Rose, an EU competition expert at law firm DWF said the 140-page subsidy control bill contained complexities that would mean that the UK’s new regime would see more subsidy awards in the courts than ministers anticipated.