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United States Tariffs: Steel and Aluminium

Volume 789: debated on Tuesday 13 March 2018


My Lords, with the leave of the House, I shall now repeat a Statement made by my right honourable friend the Secretary of State for International Trade in another place. The Statement is as follows:

“Mr Speaker, on Thursday 8 March, President Trump announced that the United States would impose a tariff of 25% on steel imports and a 10% tariff on aluminium imports after a period of 15 days, with the final day being 23 March. Canada and Mexico, with which the United States is renegotiating the North American Free Trade Agreement, have been exempted from the tariffs, subject to the successful conclusion of the NAFTA negotiations.

For the products within the scope of the investigation, in 2017, the US accounted for 7% of UK steel exports and 3% of UK aluminium exports. In addition, the UK accounted for 1% of US steel imports and 0.1% of US aluminium imports, in tonnage, at a value of £360 million and £29 million respectively. The President outlined that there is scope for further countries and certain products to be exempted from the tariffs.

From a UK perspective, as Members of this House know, the UK and the US are strong partners and allies, and the US-UK economic and security relationship is crucial. The US is our largest single-nation trading partner, accounting for a fifth of all exports, worth more than £100 billion a year. It is also the top destination for outward direct investment by the UK and the single biggest source of inward investment into the UK. We have a long-standing and special relationship with the US. However, that does not mean that if we disagree with something, we will not say so, and we do disagree with the US decision to implement tariffs on steel and aluminium imports based on national security considerations.

Such unilateral trade measures have weak foundations in international law and are not consistent with the Department of Defense’s own judgment in an investigation that was conducted on the basis of national security. There is undoubtedly a problem of overcapacity in the global steel market, but our strong view is that a global problem requires a global solution, not unilateral action. The UK has worked hard to address the issue of overcapacity. The Prime Minister called for a forum of G20 members to tackle this issue, which my right honourable friend the Secretary of State for Business, Energy and Industrial Strategy attended in Berlin in November. The forum agreed comprehensive policy solutions. Most recently, the Prime Minister raised it during her visit to China, which is the world’s leading producer of steel and aluminium products. The UK will continue to work within the rules-based international trade system to tackle this problem.

Since the President asked the Department of Commerce to launch the investigation into the national security impact of steel and aluminium imports last April, the Government have made clear to the Administration on repeated occasions the potentially damaging impact of tariffs on the UK and EU steel and aluminium industries. The Prime Minister has raised her concerns directly with President Trump. I have spoken on several occasions to the Commerce Secretary and to the US Trade Representative about the investigation, including this afternoon. I spoke again today to the director-general of the World Trade Organization, Roberto Azevêdo, and I regularly speak to the EU Trade Commissioner, Cecilia Malmström. Several of my Cabinet colleagues have raised this issue with their opposite numbers. The Government have worked closely with the EU as part of our unified response. In addition, I assure right honourable and honourable colleagues that we have been in regular contact with the UK steel and aluminium industry throughout. I spoke to Gareth Stace at the weekend and again this afternoon.

There are two routes to petition the US for exemptions from the tariffs. The first, overseen by the US Trade Representative, will exempt countries with which the US has a strong national security relationship and which agree alternative means to address the threat to US national security from the relevant imports. The second, overseen by the Department of Commerce, will evaluate product exemptions if it is deemed there is no domestic US alternative and there are national security considerations, but only after a request for exclusion is made by a directly affected party located in the United States.

The Department for Business, Energy and Industrial Strategy will be assisting UK industry in working with US customers to build their cases for the exemption of individual products. I will be travelling to Washington this week for face-to-face meetings with the US Trade Representative, Ambassador Lighthizer and Commerce Secretary Wilbur Ross, as well as leading members of Congress. I will be making the case for the UK, as part of the EU. We have a strong defence and security co-operation relationship. As close allies in NATO, permanent members of the UN Security Council and nuclear powers, close co-operation between the UK and the US is vital to international peace and security.

As the House is aware, our current membership of the European Union means that the European Commission will be co-ordinating the EU response, and we have been clear that we will continue to adhere to the duty of sincere co-operation. The EU response is focused on three possible areas. First, the European Commission is preparing to introduce immediate duties on the US, ahead of a WTO dispute. The EU has shared a draft list of proposed items for duties and we expect it to publish this list early next week. Secondly, the EU can apply a safeguard measure of its own to protect the steel and aluminium industries from being damaged by an influx of exports to the EU caused by the displacing effect of US tariffs. Thirdly, the EU can pursue a dispute at the WTO. We are currently evaluating all aspects of these responses together.

We are clear that it is right to seek to defend our domestic industries from the direct and indirect impacts of these US tariffs, protecting both jobs and industrial capacity. We will also press for any response from the EU to be measured and proportionate. It is important that the UK and the EU response works within the boundaries of the rules-based international trading system. Over the coming days, we will be working closely with British industry and the EU to seek swift clarification and mitigation. I commend this Statement to the House”.

My Lords, that concludes the Statement.

My Lords, I thank the noble Baroness, Lady Fairhead, for repeating the Statement. This is my first opportunity to debate her at the Front Bench, and I am looking forward to working with her on the international trade Bill when it reaches your Lordships’ House.

We have, over the past year, heard regular statements about problems affecting our steel industry, although this announcement of tariffs on steel and aluminium imports, blatantly aimed at protecting US producers, must rank as one of the worst because of its implications more widely for free trade.

The House of Commons Library briefing paper on the steel industry in the United Kingdom 2016 suggested that the steel sector accounted for £1.6 billion of UK economic output, which is about 0.1% of the UK economy and 0.7% of our manufacturing activity. It has about 600 businesses, and 32,000 people are employed in the sector. The UK is the 18th-largest steel producer in the world, the fifth-largest in the EU after Germany, Italy, France and Spain. Approximately 15% of 350,000 tonnes of steel was exported directly to the United States in 2017.

We should extend our concern and support to the employees of British steel firms and their communities, which must be very worried about this questionable and ill judged unilateral decision by the USA. What assessment have the Government made of the impact of this decision on jobs in the steel sector and the economic hit that will be felt, particularly in communities outside London?

I have three further questions for the Minister. First, this announcement was not unexpected. It followed a series of pledges from President Trump to take what he calls “tough and decisive action” on perceived threats to the US national interest and to domestic producers as a result of international trade competition from overseas. It is very much in line with his “America first” platform. When did the Government become aware that President Trump was going to impose tariffs on imported steel and aluminium? What representations did the Government make to the White House prior to the announcement, and what assurances were sought that these tariffs would not be applied to UK exports?

Secondly, earlier this year, President Trump announced tariffs on imported washing machines and solar panels to give a boost to US producers in these sectors. President Trump also imposed a 30% tariff on imported solar cells, and last year the Department of Commerce sought to impose tariffs of up to 292% on imported narrow-body, medium-range jets until the US International Trade Commission accepted the arguments made by Bombardier and others and overturned that decision. What other sectors of the economy are the Government concerned about? What representations are they currently making to ensure that the UK will be able to export to the United States in the near term without facing unfair tariffs? For example, the President has mentioned additional protection for intellectual property. Given the strength of our creative industries, have the Government taken up that issue in particular?

Finally, the Secretary of State announced the establishment of a US-UK Trade and Investment Working Group in July last year, a group that has met twice since then. Given that the President has said he would welcome a trade war and thinks America would win it, what discussions have been had about steel, aluminium and the other new tariffs at these meetings? What assurances have been sought from the US Government about exemptions for UK exports in any free trade agreement that might be in consideration post Brexit?

My Lords, we too are grateful to the Minister for repeating the Statement. Just at the time that we are loosening our ties with our largest single integrated market in the European Union, we see the next bilateral largest market in the United States moving towards a protectionist tone. Over recent months we have been repeatedly counselled by Ministers that we should look at not just the rhetoric of the United States President but at the actions. Now it is quite clear that there are repeated actions which are contrary to the interests of the British economy. The announcement of the Secretary of State today and of economic advisers last week are clear.

When I was in Buenos Aires as an observer at the ministerial conference of the WTO, the US left without a communiqué being signed. These worrying trends are clear to see. Last year, the Secretary of State, Dr Fox, said, while in the US, referring to the UK/US relationship:

“Firstly, we must lead by example, and work to encourage our trading partners across the world to support, and adhere to, the rules-based global trading system”.

Will the Minister therefore confirm that it is the view of Her Majesty’s Government that this action by the President is clearly contrary not only to how strong allies with a so-called special relationship should act but to international law?

We also know that in the presidential proclamation the President said that there would be a mechanism for reviewing the decision on impairing US national security if the countries concerned showed that their actions would not impair that national security. However, in recent discussions with the US, the EU and Japan could not discern on what basis these issues would be considered. What is Her Majesty’s Government’s view on these blackmail conditions that President Trump would seek to impose on allies for there to be adjustments to, or the removal of, these tariffs?

We have heard reference to the working group, which I have raised in this Chamber before. Did officials on the working group inform us that there was a likelihood of these tariffs being imposed on the United Kingdom? The Secretary of State indicated that he was due to visit the US and had no doubt planned to discuss the progress of the working group. What status does the working group now have given that we are clearly in a trade dispute?

Finally, we and our allies around the world continue to believe in free trade, even if the United States does not. How will we seek redress within the WTO mechanisms? Will the Minister reassure the House that we will be in precisely the same position as the European Union if we appeal for redress under the WTO mechanisms? This trend of protectionism cannot be in the interests of the United Kingdom. Clearly, our interests lie in standing shoulder to shoulder with our European Union allies on this issue.

My Lords, regarding the core of the problem, which is global excess in steel capacity around the world, we have been clear as a Government, and my right honourable friend the Prime Minister has been absolutely clear, that this is the wrong way to approach a global problem. The right way to approach it is the way we have been encouraging: through summits, where we have discussions about the measures countries will take to manage the problem in a balanced, global, multilateral way. We have been clear that we do not think this decision is in line with our approach, and we do not agree with it.

We are trying as a Government to work as part of the EU—as you know, we have a duty of sincere co-operation, which we fully expect and intend to fulfil. The first aim will be to stop this happening at all, through a process of negotiation and engagement. There have been multiple examples of engagement, from the Prime Minister to the President and the Secretary of State for International Trade, all the way through government. We will also work with the EU to look at the protections we can put in place if our aim cannot be achieved. My difficulty in addressing the comments of the noble Lord, Lord Stevenson of Balmacara, about the effect on jobs, is that we do not know what the state of the negotiations and engagement will be, what exemptions can be achieved and therefore what the effects will be on which products. It is too early to say.

However, we will absolutely be supporting UK steel and aluminium companies, through multilateral bodies, trying to ensure a global playing field, and, through various initiatives, ensuring that the EU is working at the global summit on 28 specific recommendations to address capacity. We believe that that will help our steel and aluminium industries.

We are also working with the steel industry. I mentioned that we have met with Gareth Stace, the director of UK Steel, and we are working within BEIS to ensure that UK steel companies which think they will be affected present their cases as actively as possible in the US, so that companies there ask for exemption for their products. We are encouraging trade unions and industry to work with us; we find that in the US there is significant support from both Republicans and Democrats in Congress for open and free trade.

The noble Lord, Lord Stevenson, asked how much of a heads up we had about this. There have been noises in the press about potential statements. It was broadly mooted before a meeting in Sofia, where my right honourable friend the Minister of State for Trade Policy in the DIT was present. It was discussed in broad terms then but, until an executive order was put in place on 8 March, it was speculation.

Before we leave the EU we clearly cannot be in any formal negotiations, so the trade and investment working group is discussing options only. It has been making progress and is due to meet, as planned, next month, so that work is continuing. I believe the noble Lord, Lord Purvis of Tweed, asked specifically about that. We welcome the US in saying that they look forward to a free trade agreement when the UK is in a position to negotiate one.

In terms of the EU and the safeguards, this Government remain absolutely committed to the WTO. We believe in the principles of free trade but in a rules-based, multilateral environment, and we will continue to support the WTO. We believe that our role here is to make sure that the benefits are seen and that we do not raise the temperature of the debate, and to engage with the EU and industry on behalf of the UK but as part of the EU.

I remind the Minister that the Secretary of State, whose Statement she has just repeated, has in the past, when talking about trade deals with the United States, mentioned agricultural products. Last week, President Trump—in one of his tweets; not in an official government statement—also linked agricultural products with the very issue of steel and aluminium. Can the Minister give a categoric assurance that the UK Government will not sell out the UK agricultural industry in order to get a deal over steel and aluminium?

Regarding the idea that this is in the national interest, we have been clear that the EU assessment is a safeguard. We are trying to stop this happening in the first place and trying to get exemptions. We are taking this forward through engagement, and we will need to create a list of measures with the EU that we will take on a proportionate basis if we do not progress. My sense is that the best thing we can do is to work on global steel capacity multilaterally. I think that that was the view of this Government and your Lordships’ House, who believe in that rules-based environment.

Does my noble friend agree that our response from within the European Union is more effective than it would be from without the European Union?

It is difficult to argue that one way or the other. I know that the UK has specific national security relationships with the US. We have had a long and enduring relationship on defence, strategy and economic growth, and therefore we have a significant position on our own. I cannot calibrate the difference but I know that we are part of the EU, and on this matter we will be working alongside the EU and following the duty of sincere co-operation.

Does the Minister accept my view that it is very welcome that the Government are taking such a forthright attitude towards these measures taken by the United States—measures which seem to have no foundation whatever in the rules-based World Trade Organization order under which we have all lived so profitably for the last 70 years? Will she say quite unequivocally that we support all Cecilia Malmström’s efforts to get an exemption both for products and for the European Union as a whole, and that our support for her efforts is unequivocal? When the Secretary of State goes to Washington later this week, will he make it clear that we are supporting Cecilia Malmström’s efforts on our behalf? If the Minister will forgive me for correcting her, it is not only a question of sincere co-operation; we are part of a common commercial policy, and that means working to get an exemption for the whole European Union.

Finally, taking retaliatory measures is obviously extremely unpalatable, and taking a dispute settlement to the World Trade Organization is not something that we would have wished for. We are faced with a President of the United States who seems to think that trade wars are a good thing, but he had better learn some time that they are not.

I thank the noble Lord, Lord Hannay, for his remarks. We are engaging with the Trade Commissioner, Cecilia Malmström, and the Secretary of State will be acting on behalf of the UK but as part of the EU. We are working to stop this happening—job one will be to stop this happening; job 2 will be to get exemptions where we can—and the Secretary of State will be speaking on behalf of the EU and UK industry. I would welcome help from anyone in the industry and the unions who has an interest in this because there is a real issue here. We need to make sure that the benefits of free trade are fully realised, as we have seen in this country. A rules-based international system has lifted 1 billion people out of poverty and we do not want to set our face against that. The Secretary of State will be speaking to Cecilia Malmström later today ahead of his visit and he will feed back after his visit, so we are connected.

My Lords, in the light of the events that we have been discussing, how long can the Government credibly advocate an enhanced trade deal with President Trump after Brexit? President Trump is one of the most volatile and capricious presidents in the history of the United States. He has taken actions which are contrary to the rules-based system and even today has sacked Secretary of State Tillerson for his independence of thought and, in particular, for his expressions of sympathy and support for the United Kingdom in relation to the events in Salisbury. How can we possibly put our trust in President Trump?

I thank the noble Lord. We have had a long and enduring relationship with the US and, in the past, when protectionist measures were applied—for example, in 2002—they were eventually rowed back and the relationship continued. It is important that we continue to demonstrate the benefits of free trade. The number of jobs expected to grow in the UK steel industry versus the number that might be lost in downstream industries indicate that potentially, this is not a good move in the US. A recent think tank report said that there could be a net loss of around 146,000 jobs in the US if this was put in place. We need to argue for free trade. We have a long and enduring relationship and the UK/US economic, national and defensive co-operation will endure long term into the future.

My Lords, I congratulate my noble friend on the way she is handling this delicate and tricky matter. I hope that she will be involved in some of these negotiations and, if she is, that she will reinforce the fact that we are working with friends and neighbours in the European Union and that this ought to be an object lesson to everyone who has the interests of our country at heart.

I thank my noble friend for his supportive words. Although officially I am not in the Trade Policy Unit—I am concentrating on exports—I obviously have interactions with it. It is likely that I will visit the US in a few weeks’ time and I will continue to represent the importance for us of addressing the excess steel capacity in the world, which is the root cause of the problem. We have made good progress along those lines. Where we see other countries behaving improperly, we are able to initiate anti-dumping or anti-subsidy measures. In the UK alone there are 45, which have proved to be effective. We will continue to fight but it is important that we do so within a rules-based system.

My Lords, I congratulate the Minister on her appointment, and we wish her well in her trade export work. We commiserate with her, however, for having to repeat that Statement from the Secretary of State for International Trade, which was a catalogue of name calling and impotence. If he had the influence he claims with his great long list of American friends, whom he will be lobbying over the next week or two, we would not have had these tariffs in the first place.

I have two questions. First, is the Minister in any way optimistic that President Trump will lift the tariff he has announced? Secondly, does the Minister not think that this situation gives the complete lie to the argument for leaving the European Union on the basis that Britain’s global trade will somehow compensate for the loss of trade with the European Union that we will suffer? In addition, does the Minister not agree that the Prime Minister’s choice of words in her Mansion House speech—she said that it is now an object of policy on the part of Her Majesty’s Government that we will have less market access to the European Union—looks ever more unwise with each tweet and utterance from President Trump?

I thank the noble Lord for his welcome. I do not agree with his sense of impotence regarding the Statement. To begin with, there are a whole range of things we are doing for global steel capacity. We are part of the EU and work within that framework. We are engaging on behalf of UK industry with the US and EU, and our hope is that we can negotiate. We are looking at exemptions—I would not like to give you the probability of which, if any, we will get, but we are certainly pushing very hard for that. We need to continue to engage and represent the UK as part of the EU in this regard.

While the Minister is absolutely right that we must act in full conjunction with the European Union, there is no question but that we have a very special relationship—in whatever way that is described—with the United States. Although the noble Lord, Lord Campbell, has said that we cannot possibly trust the President of the United States, he is the President and it is very important that the Secretary of State makes effective representations to him and his colleagues to ensure that we avoid what could otherwise be an extremely difficult situation.

I absolutely agree with my noble friend Lord King. Very strenuous representations will be made. We think these tariffs have a very weak legal basis, and the EU deems that this will enable some countermeasures and, possibly, safeguards to be put in place. We need to engage with this very important friend and ally to make sure we get above this and move on to the agenda of building wealth right across the world, and make sure that we have a sensible global approach to global problems.

My Lords, when the Government consider which debating points to put before the United States, and to President Trump in particular, they might wish to remind him of his policy of putting America first. Will the Minister put on record, with supporting evidence, why these measures are detrimental to all US businesses?

There are studies available. I mentioned a US trade body which represents downstream industries that think they will be negatively affected and that the net effect on US jobs will also be negative—its study is already a public document. We are trying to avoid protectionist measures that stop the further development of economic trade and of developing countries. The latter could provide a ratchet effect and bring us all up together.

My Lords, the Statement explains at length how the Americans have made an assessment of the strategic requirement for a steel industry. That begs the question of why we have not made such an assessment. Do the Government believe that there is a strategic requirement for a viable steel industry in this country?

There is a question around whether it is a strategic national interest element, as the noble Lord mentioned, but we would question the President’s argument for it. I think that a lot of people would also question the figure of 80%. In terms of this country, we believe in open and free trade and that we should be protecting our industry to make sure that the sector is not the victim of bad practice, which is what the rules-based regime does. We are also trying to support our industry by making sure that we adjust for any requirements that we put on it. For example, the Government have compensated the UK steel industry to the tune of more than £200 million for the additional costs linked to the climate change levy and the renewables targets. We believe that we should allow open and free trade and that we should protect robustly our businesses so that they are able to compete on a level playing field, and we will support them in any way we can to do so.

My Lords, I congratulate my noble friend on her new responsibilities and on the way she has been answering these questions. This action by President Trump should not come as a surprise given that, so far as I recall, it was part of the manifesto, as it were, on which he was elected. Nevertheless, it is wholly deplorable and should be condemned. But is it not the case that we will be able to use the special relationship to which my noble friend Lord King and others have referred only once we leave the European Union? As long as we remain within the European Union, overseas trade is an EU competence and all we can do is support the European Union in the efforts that it is making. After we have left, it will be a different story.

I agree with my noble friend Lord Lawson that when we are an independent trading nation, we will be able very directly to use the relationship we have with a key ally. That said, given that we believe so strongly in global free trade within an international rules-based system, and given that we are part of the EU and have a duty to co-operate, we will use our special and deep relationship with the US to help the EU overall in progressing this with the US by trying to ensure that we have the best possible chance of eliminating the tariff or getting significant exemptions.

My Lords, does the noble Baroness agree that it is a complete fantasy if the noble Lord, Lord Lawson, thinks that we will be in a stronger position to negotiate with the United States when we do not have the weight of Europe behind us and we are acting entirely independently? Further, does she not think that that is a controlled experiment which can only do enormous harm to the country and that we would be better off not engaging in it in the first place?

We should be happy that we have a long, enduring and strong relationship with a very important partner and all our efforts should be concentrated on addressing where we do disagree, because where that is the case we will say so, and in this case we have done so. Equally, however, the numbers I have seen on our trade with the US show that we have $1 trillion-worth of mutual investment in each other’s economies. We should be taking that forward and using it to make sure that global trade really prospers around the world.