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US Imposition of Steel and Aluminium Import Tariffs

Volume 791: debated on Monday 4 June 2018


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

“Mr Speaker, on Thursday, 31 May President Trump announced that the United States would impose tariffs of 25% on steel imports and a 10% tariff on aluminium imports from the EU. Canada and Mexico, with whom the United States is renegotiating the North American Free Trade Agreement, will also be subject to the same tariffs. Although Argentina, Brazil and South Korea have avoided tariffs, those countries agreed to lower exports to the US. Indications are that they will be restrictive, in some instances involving quarterly quotas. For the products within the scope of these tariffs, in 2017 the US accounted for 7% of UK steel exports and 3% of UK aluminium exports, while 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.

We are deeply disappointed that the US has taken this unjustified decision, particularly on grounds of national security. We share 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, and other EU states are also key players in transatlantic security co-operation. As I said the last time I addressed the House on this issue, these unilateral trade measures have weak foundations in international law and they are not consistent with the US Department of Defense’s own judgment in an investigation that was conducted on the basis of national security. We believe the EU should have been permanently and fully exempted from the unjustified measures on steel and aluminium. We will continue to make this case at the highest level, in concert with the EU. Our priorities are now to defend the rules-based international trading system which supports growth, consumers and industry; to ensure that this does not escalate and risk further undermining world trade; and, most importantly, to protect the interests of British industry.

The use of national defence as the rationale for this action threatens to create a worrying precedent. We are clear that these unjustified additional tariffs could harm consumers, hold back growth and ultimately damage industry by driving up the price of inputs and production and diminishing global competitiveness. We remain of the view that issues of global overcapacity in the steel market are best solved through international collaboration, 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 and the UK will continue to work within the rules-based international trade system to tackle this problem through the G20 steel forum. However, as the US has decided to impose these tariffs which will damage the steel and aluminium industries in Europe, we must respond. As a member of the European Union, we will continue to work with the European Commission and member states on the EU response.

The EU response is focused on three areas. First, the European Commission is preparing to introduce immediate duties on the US, ahead of a WTO dispute. Following a unanimous decision by member states, the EU notified the WTO of its potential list of product lines on 18 May and could trigger tariffs on this list of products from 20 June. The Commission is required to seek member states’ approval a second time for any of these countermeasures to come into effect. Specific times are yet to be determined by the Commission.

Secondly, the EU can apply safeguard measures to protect the steel and aluminium industries from being damaged by an influx of imports to the EU caused by the displacing effect of US tariffs. The EU is finalising an ongoing investigation, launched on 26 March, into potential EU-level safeguard measures to protect its own steel market from trade diversion resulting from US measures. Provisional measures could be adopted as early as mid-July. The EU has also introduced surveillance of aluminium imports to determine whether an aluminium safeguard investigation is justified. We will support any safeguard measures required to deal with steel diversion as a result of these tariffs.

Thirdly, the EU can pursue a dispute at the WTO, and it filed such a dispute challenging US steel and aluminium tariffs on Friday.

It is right to seek to defend our domestic industries from the direct and indirect impacts of these US tariffs. The response must be measured and proportionate. It is important that the UK and the EU work within the boundaries of the rules-based international trading system.

Since the President asked the Commerce Department to launch the investigations into the national security impact of steel and aluminium imports last April, the Government have made it 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 also raised her concerns with President Trump. I myself have spoken on multiple occasions to the Commerce Secretary and US Trade Representative about the investigation, the director-general of the WTO, Roberto Azevêdo, and the EU Trade Commissioner, Cecilia Malmström, as well as my colleagues in member states.

The Government have worked closely with the EU as part of our unified response. In addition, I can assure the House that we have been in regular contact with the UK steel and aluminium industry throughout, and the Business Secretary has convened a steel council, which will take place shortly.

We remain committed to robustly defending and protecting the UK steel and aluminium industries and their employees. The Government will continue to press the US for an EU-wide exemption from these unjustified tariffs. In parallel, UK suppliers will want to encourage their US customers to seek product exemptions via the process being overseen by the US Commerce Department.

The Department of Business, Energy and Industrial Strategy will be hosting a meeting with the industry tomorrow morning to share information and advice on the product exemptions process being run by the US Department of Commerce.

UK firms without a presence in the US cannot apply directly for a product exemption. This means that UK firms will need to work with the end users of their products in the US to apply for a product exemption and to gather the relevant data and justification.

The Government will support applications made on behalf of UK industry with representations to the Commerce Department to process applications for product exemptions as promptly as possible. My department published an information note on the procedure on GOV.UK on Friday.

The Government are committed to free and fair trade and the international rules that underpin both. We will seek to promote and protect those rules alongside the interests of British industry.

I commend this Statement to the House”.

My Lords, I am grateful to the Minister for repeating the Statement and I welcome her to the Front Bench—I think it is the first time we have had a chance to speak directly across the Dispatch Box. That was three pages’ worth and quite long on description but there was not very much on achievement. I wonder whether the balance was entirely right, given that it was mostly about the difficulties that firms and others will experience in the new situation and very little about what will happen to our own British firms and employees. I have to say that if the Government have been spending the last month seeking to change minds in the United States Government, it has been a spectacular failure, apart from making it very clear that they can do little themselves and that much has to be done in co-operation with the world’s larger trading blocs, including the EU.

The House of Commons Library briefing paper on the industry shows that the steel sector accounted for £1.6 billion of the UK’s economic output. Some 330,000 tonnes of steel are exported annually by British producers, roughly 15% of which are to the United States, so we are talking about a very substantial hit on the industry. The industry has about 600 businesses and 32,000 people are currently employed there. On this side, we make it very clear from the beginning that our concern and support is there for 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 aluminium sector and the economic hit that will be felt, particularly on communities outside London? What representations had the Government made to the White House prior to this announcement, and what assurances were sought that these tariffs would not apply to the UK? Will the Minister put any documents relevant to that in the Library for us to look at?

Secondly, what other sectors of the economy are the Government concerned about? The President has mentioned in passing additional protection for intellectual property. Given the strength of our creativity industries, have the Government taken up that issue in particular? If so, will the Minister give us some detail? The Secretary of State announced the establishment of a US-UK trade and investment working group in July last year. What discussions have been had about steel and the other new tariffs at these meetings? Has it been convened to discuss this issue?

Turning to the Statement itself, I note that half way down page 2 it says that before the EU can take any direct action on countermeasures to come into effect, it has to consult member states. Will the Minister confirm that Parliament will have a chance to discuss these when this second round of discussions is requested? Secondly, although the Minister made it clear to the House that the department had been in regular contact with the UK steel and aluminium industries throughout all this and the Business Secretary had convened a steel council, will she give us details on who actually attends that council and what exactly are its programmes? What concrete steps, in short, will it take to help our industries?

My Lords, I too welcome the repeating of the Statement in your Lordships’ House. I would not normally be speaking across the Dispatch Box and normal service will be resumed when my noble friend Lord Purvis is available. The noble Lord, Lord Stevenson, makes a good point in that this is very long on adjectives and very short on hope. He set out a very good analysis of the UK steel market. My understanding is that a large proportion of these exports are at the high-technology end of steel, so in a sense the bulk numbers we use for the amount of the total industry affected by this blind us to the fact that the high-technology end of our industry is disproportionately affected. I would like to understand the Government’s analysis of how this will hit that particularly important part of the UK steel offering, because this is an area in which we have excellent businesses and a recovering economy and this could be a very serious blow going forward.

The Statement says in robust terms that the tariffs have weak foundations in law. Elsewhere, Secretary of State Liam Fox is on the record as saying that they are illegal. Do the Government stand by the view that they are illegal, or are we going to continue to tiptoe around this issue?

The noble Lord, Lord Stevenson, also mentioned the US-UK trade working group. If it has not been discussing this issue, what is this group for? While the Minister is on her feet, can she tell us under what mandate this group operates? I am not aware that there has been extensive discussion in Parliament about the basis for future trade with the United States, so what is this group’s mandate and what has come back on steel?

It is clear from the Statement that if the EU decides to trigger its punitive measures, the Government will be part of that because we are part of the EU. If the WTO is brought in on a legal basis, it will be a drawn-out affair, going well past March next year. Assuming that the Government get their way and we exit the customs union, HMT will have a decision to make: will it continue to maintain the robust measures that we have talked about and sit in solidarity alongside our largest trading partner, or will the Government decide to side with the United States? Perhaps the Minister can talk us through that process.

Finally, Prime Minister Trudeau of Canada has been the most articulate in setting out how Trump’s use of the national security justification has been most hurtful and corrosive to the closest military allies of the United States. To some extent, that is alluded to, in a softer way, in the Statement. Can the Minister tell us if and when the UK will raise this in NATO and with NATO allies? If it has already been discussed, what was the result of those discussions?

I thank the noble Lords, Lord Stevenson and Lord Fox, for their questions. I particularly thank the noble Lord, Lord Stevenson, for his warm welcome. He may not continue with it when I answer his questions but I will do my best to answer the questions of both noble Lords.

As I have said, we are deeply disappointed in the action that the US has taken. We want a multilateral action. We need to look at the capacity of steel from China and work together to resolve that issue, instead of the action taken by the US. As part of the EU, we will work very closely with our stakeholders in other EU countries to ensure that we have a collective response. We are still part of the EU; we have not left yet.

Like both noble Lords, I am concerned about the impact that these tariffs will have on our steel and aluminium industry here in the UK, as well as the effect on employees. The Secretary of State and other Ministers, both within business, will meet CEOs, trade unions and other bodies connected to the industry to look at what impact the tariffs will have on our industry and how we can move forward with the industry to find solutions. It is too early to say what the impact will be but I have indicated the amount of money involved in terms of turnover.

One of the other questions posed by the noble Lord, Lord Stevenson, was on intellectual property and whether these tariffs are likely to spread. Indeed, some people have asked whether the auto industry will be affected. Once again, we are working closely with the EU and the US. We must not forget that the US is a very important and key ally of the UK. We want to ensure that we, with the EU, discuss very clearly the impact that the steel and aluminium tariffs will have. I know that Germany is looking at the issues around the car industry and the tariffs that may happen in that arena.

I was also asked by the noble Lords, Lord Stevenson and Lord Fox, how often the trade and investment group meets. I know that it is about to meet soon, and it will look clearly at the impact these tariffs will have. However, I do not know what the group’s terms of reference are. I will certainly write to noble Lords and place a copy in the Library so that they know exactly who sits on the group and what its terms of reference are.

I was also asked whether Parliament will have a chance to vote before the EU goes back, in relation to the WTO rules. We are firmly of the view that we want to see a rules-based solution, not a unilateral situation. We are disappointed, and I personally say that it is to be regretted that the US has taken the decision it has. Nevertheless, I am not clear whether Parliament will have a chance to vote. Again, I will write to the noble Lord. On balance, from the briefings I have seen, the EU will make a decision at a later stage on the list it has identified.

The noble Lord, Lord Fox, mentioned the Canadian Prime Minister’s strong and vocal opposition to the tariffs. We are very disappointed, as I said, and it is clearly to be regretted that these tariffs are to take place, but it is a question not of how vocal one is but of what the outcome will be. We want an outcome where we have free trade with the US. We will work very closely to see what we can do regarding these tariffs, which we think are unhelpful to the UK aluminium and steel industry. We will endeavour to work very closely with employers and businesses in the UK, and employees, but just as importantly with the US, because it is an important ally and we need to ensure we can work in this collaborative method to try to get some exemptions not only for the UK, but for the EU.

If there is anything I have missed I hope noble Lords will forgive me. I will write to them to respond.

My Lords, I also warmly welcome my noble friend to the Dispatch Box and what she has already said. Are UK Ministers involved, and will they continue to be involved, in all the discussions in Brussels on the day-to-day response to these US tariff measures? As my noble friend rightly said, we have not left the EU yet. We need to ensure that any trade ping-pong does not discriminate against UK industries. As she mentioned, lists will be doing the rounds, whether on intellectual property, cars or even whisky and gin. It is very important that we not only promote free and fair trade, of which I am the biggest fan and supporter, but look after our interests in any EU list.

My Lords, I totally agree with my noble friend that we need to promote free and fair trade. Of course, my friends in the other place are having regular meetings with their counterparts in Europe and the US to look at not only the impact of these actions, but how we can work closely together, particularly with the EU, to alleviate their consequences. The Secretary of State told me about an hour ago that he has met French, German, Irish and other counterparts in the EU to talk about how we will move together collectively and multilaterally.

My Lords, we should all try to learn lessons from the mistakes of the past. Between the two world wars the human race suffered greatly from protectionism and the escalation of tariffs—actually instigated by the United States with the Smoot-Hawley Tariff Act—and a large amount of output and employment was lost directly as a result. Since the Second World War, the Americans have taken a very different and much more positive attitude towards the growth of international trade but Trump has reversed the initiative started by President Kennedy, continued through the Uruguay and Doha rounds, which has led to such great prosperity throughout the world. In these circumstances, a tone of some robustness and decisiveness is called for. Of course we hope the United States will not proceed with these threats but does the Minister agree that if they do implement them, there is only one possible response: we must retaliate in a rapid, commensurate and effective way? Under no circumstances can we adopt a policy of unilateral disarmament in this area.

The noble Lord is absolutely right that protectionism in any area is not something that we think we should be working towards. We have developed a very robust tone and it is right that we have. I have said this is regrettable and disappointing, and we have made our views known. In fact, the Prime Minister also made her views known through the G20. We will continue to ensure that British interests are at the fore of our discussions so that we get the best possible deal for our businesses. It would be easy to retaliate but I do not think that in the long run tit for tat would work for our industry or our companies. We must work robustly but fairly and try to promote the free trade that we all seek. That is the best way forward. I reassure the noble Lord that the fact that we are very close to the US does not mean that we are not having the difficult discussions that we need to have.

My Lords, I am sure everyone will admire the way in which my noble friend is making disappointment sound robust, but it really is important that we do. Does she accept that while it is encouraging and comforting to know that we are working so closely with our friends, allies and partners within the European Union, it is utterly crucial for the survival of our continent that we continue to work with those European friends and partners, whatever the relationship?

My Lords, I agree with my noble friend. We are part of the EU and even when we leave the EU we will not leave our European partners. We will continue to work very closely with colleagues in the EU. That will not change.

My Lords, first, will the Minister answer the question she was asked earlier about the Government’s view on the legality of the United States pleading national security grounds for the action it has taken? Is it the Government’s view that the United States has acted illegally in this respect? It is rather hard to believe that the Government are associating themselves with the EU position of going to the WTO claiming illegality if they do not think it is illegal. Perhaps she can be clear on that point. Secondly, can she say what action the Government are taking with regard to the inquiry which the US Administration have undertaken into whether the motor industry also qualifies for the national security categorisation, which would lead to the possibility of unilateral measures against imports of cars into the United States, which would of course be far bigger in its impact than what has been done on steel and aluminium? What are the Government doing about it? Are they making representations to that inquiry? Are they making it clear that if action were taken on the spurious ground of national security, there would be retaliation?

On the issue of legality, on 1 June the EU launched a dispute at the WTO challenging the US tariffs. That is all I can say at the moment, because I do not have information on whether we have had legal advice. We are working as a member of the EU, so we are not going out unilaterally. As part of the EU, we have launched a dispute at the WTO about the US tariffs and we will see what emerges from that. On the motor industry, the noble Lord is absolutely right that an investigation has been commenced, but, once again, it is too early to say how that will go. However, I hope he will feel reassured that the Government are working very closely with our EU allies and partners to make representations at every level.

My Lords, further to the point made by the noble Lord, Lord Hannay, it seems completely specious that this decision should be based on national security or defence grounds. You are clearly allowed to use materials to build, for example, warships or aircraft in your own country where you can say, “We need to have this capability within the country”, but you would not apply sanctions against other people’s products to do that; you would say, “We will buy this steel or aluminium from within our country”. I am not aware of, for example, any British steel or aluminium being used in any of the huge shipbuilding programmes for the Americans at the moment. Therefore, this must surely be illegal, must it not?

The noble Lord is pressing me on this issue but I cannot give an answer that goes much further than the one I have already given. He is absolutely right that, as far as the UK is concerned, we think that this is not only disappointing but very regrettable. The EU is taking action by going to the WTO; there is an internal dispute mechanism. We are a rules-based country and we want to follow those rules. We will not unilaterally make a decision that is not based with our partners and allies in the EU.

My Lords, surely there are circumstances—perhaps not on this occasion—where a Government should have the right to protect their key industrial supply base, particularly in steel, coal products, aluminium and perhaps some chemicals, if only to protect in the longer term against strategic manufacturing and raw-material supply problems in times, or potential times, of conflict. This might include terrorism at sea and transport through conflict zones. That was an argument that my party used in the 1980s when Mr Ian MacGregor was running down the steel industry.

My Lords, that is interesting but I am not sure what the question was. All I can say is that the US has unilaterally made this decision on tariffs. It is unfair, unreasonable and very regrettable, and the EU is taking the appropriate action available to it by referring it to the WTO. We will see where that leads us.

My Lords, is this the same President Trump with whom Messrs Johnson, Davis and Fox believe we can enter into an agreement giving frictionless trade between the United Kingdom and the United States?

But of course. One can have a dispute at one end but at the same time still work collaboratively on other trade deals. One has to look at relationships across the board. Although we have a major issue here around tariffs, which we agree needs to be dealt with, we can nevertheless still have a very constructive relationship with one of our most important allies. One must not forget that, outside the EU, America is our biggest trade partner.

My Lords, in practice, what may well happen is that, in the short term, businesses will find a way to sell through third-party countries, especially as the origin rules are now becoming less and less clear. What is the Government’s attitude towards that?

How the US polices its tariffs will be a matter for it. We have to safeguard the way in which perhaps steel and aluminium come to the EU and the UK and ensure that our businesses and our employees are safeguarded. The EU is looking at safeguarding issues very closely. That discussion has now started to take place.