Strategic Thinking, Tata Steel and the EU

The Conservative party is killing the British steel industry. Ideological adherence to the market and the absolutism of David Cameron & George Osborne’s adherence to Thatcherism, blinkers them to any meaningful solution. The Conservatives have been dressing themselves as they party of builders, draping themselves in the Union-Jack and proclaiming themselves as the champions of economic security & British workers. But this is all false. The Conservatives are placing the blame on anyone but themselves for the handling of the crisis now engulfing the British steel industry. Yes, it is an international problem that has been looming for a long time, but the way the government has reacted (or in this case not-reacted at all) has possibly hastened the demise of essential capacity to produce steel for infrastructure projects. Time and time again we see the short-termism inherent in the Tories approach to our economy. Cut now and pay later; damn the externalities and shock-waves from a fiscal policy that is based  restraint and  ideological adherence to rolling back the state. 

China’s unwanted steel is finding its way systematically into Europe, greased by export subsidies, tax breaks, cheap state credit, and the panoply of measures used by a mercantilist power…

Tata Steel recently announced it would be selling its entire British business. The move will affect about 15,000 workers and comprises the sites that used to make up British Steel and then Corus, which was bought by Tata Steel in 2007. Port Talbot is Britain’s biggest steelworks and employs 4,000 people. Paul Mason provides a concise piece of analysis as to why Tata is in crisis:

  • global steel glut because demand has collapsed.
  • China’s strategy of  […]  dumping hundreds of tonnes of unsellable steel onto the world market
  • Europe’s refusal to allow state aid to industry 
  • The Conservative government’s refusal to face all this, delaying, prevaricating, swerving the issue.

The Tories would not be facing a steel collapse now if they had a) put the suspension of state aid rules on the table with Brussels b) consistently argued against the EU imposing anti-dumping tariffs on China c) gave a shit – Paul Mason

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First, the Conservatives are blaming everything the European Union (EU). In part the EU is not entirely blameless for allowing cheap Chinese made steel to flood the continent. However, since this crisis started, it has been attempting to introduce measures to mitigate the effects of the influx of cheap steel . The EU has for months been trying to implement changes to what is known as lesser duty rule (which currently prevents higher tariffs being imposed on Chinese imports into the EU). However, the EU trade directorate has been rendered toothless by a British veto.

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Industry body UK steel said it was galling that Sajid Javid (the business secretary) was blocking what could be a silver bullet for the problem. Gareth Stace, director of UK Steel, said:

China shows no sign of stemming the tidal wave of steel exports, which it is dumping on the global market. Anti-dumping measures in the EU do not currently have the teeth to halt this tsunami of dumped steel. The EU must follow the example of the US, by lifting the Lesser Duty Rule which would increase anti-dumping duty levels and actually make them effective. The Secretary of State for Business, Innovation and Skills, along with other member states wrote to the European Commission last week highlighting the potential collapse in the European steel sector unless action is taken now. It is therefore galling that the UK Government has not taken action itself and has continued to block these changes in the EU – leaving the steel industry on its knees. Government must support the lifting of the Lesser Duty Rule, otherwise steel manufacturing will be lost in the UK and Europe.

The Conservatives have continuously  blocked any potential rule changes in the name of free trade and to curry favour with the Chinese Communist Party.

The British are sacrificing an entire European industry to say thank you to China for signing up to the nuclear power project at Hinkley Point, and pretending it is about free trade 

osborne china steel

The Conservatives are tacitly letting the UKs steel industry die by placing road-blocks in the way of  implementation of any measures to mitigate the effects glut of Chinese made steel. The party that drapes itself in the iconography & language of nationalism is kowtowing to the Chinese Communist Party.  An Interesting aside, while Tata Steels board were in crisis talks in Mumbai, Sajid Javid had popped off on his jollies to Australia (New South Wales….). Seems the government was asleep on the job.

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Javid had to fly back to the UK (only 48 hours later) with his tail between his legs. At the same time, while Port Talbot and the surrounding community faced its darkest hour, David Cameron was in Lanzarote with Sam-Cam chill-axing …

Secondly, the government seems to be acting as though its hands are tied. Javid upon his return, blamed the EU as to why re-nationalisation (even temporarily) was impossible. But this is false, Javid (and the rest of Cameron’s lot) are simply laissez-faire Tories. There are options open to the British government to act *now*. Article 345 of The Treaty on the Functioning of the European Union (TFEU) do not preclude, as a general rule, either the nationalisation of undertakings […] or their privatisation. Article 345 is neutral in this sense. EU law explicitly protects the right of member states to nationalise industries. It does not (as many euro-sceptics argue) prevent the  governments of member states from intervening (at-least in some form of temporary or part-nationalisation).

… Member States may legitimately pursue an objective of establishing or maintaining a body of rules relating to the public ownership of certain undertakings  Joined Cases C-105/12 to C-107/12, Staat der Nederlanden v Essent NV (C-105/12), Essent Nederland BV (C-105/12), Eneco Holding NV (C-106/12), Delta NV (C-107/12), para30

Article 345 embeds the principle of neutrality.  The TFEU is neutral as to whether an undertaking is held in public or private ownership i.e.  whether the Member State or one of its organs, or private individuals own the shares in such a company. It seems therefore, that the Treaty cannot apply to nationalisations of companies in the Member States. The ECJ is tolerant of member states accused of violating the treaties if their actions are proportionate i.e. for a legitimate aim (which would include one endorsed by the electorate) and effective, but not excessive, in achieving that aim. Even if you take a narrow interpretation of the term undertaking there is no justification for the government pretending its hands are entirely tied by the EU.

article 345 TFEU.png 2
Bram Akkermans & Eveline Ramaekers ‘Article 345 TFEU (ex Article 295 EC) Its Meanings & Interpretations’ Vol.16 European Law Journal  p314

In light of this it seems odd (but also not surprising at all) that the government have ruled out re-nationalisation as a solution. Cameron held a mini-steel summit, (so glad he took a break from his holiday to engage in political theatre…) which lasted all of a few hours, before he jetted off to Washington. The Tories strategy to deal with this crisis seems to be:

1. Have a meeting (if back from holiday)

2. Hope for the best

3. Fingers crossed, eh?

4. Er … That’s it”

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Cameron has ignored calls by Jeremy Corbyn to recall parliament to debate the best course of action to take (he recalled Parliament when Thatcher passed away but he won’t for Port Talbot).

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Anna Soubry, business minister, was overruled after she suggested on Wednesday that all options were on the table regarding Tata’s future. Mr Javid, her boss, later said that nationalisation was not going to be the solution. So in a sense the government is washing its hands of the situation, despite the rhetoric & double-speak…

The government will do everything it can, working with the company, to try and secure the future of steel-making in Port Talbot and across our country. It’s a vital industry. – David Cameron

Jeremy Corbyn (who cut short his holiday in Devon…) has been putting pressure on the government to act in order to protect British jobs, calling for:

… immediate government intervention to protect our steel industry and not see it destroyed on the altar of a global corporation that decided somewhere along the line that Port Talbot is expendable. Sorry, it’s not. We’ve got a different story …

Further, Wales’ First Minister Carwyn Jones has said a UK government take-over would buy time for Tata Steel.

The Tories are letting essential national infrastructure rot away  due to their ideological adherence to the market …the government could act, it could do something. If it cannot not fully re-nationalise, perhaps do what it did with East Coast in 2009, create a shell company with shares owned by the state (to operate around the edges of EU competition law) but the Tories won’t do this.

The collapse of the UKs steel industry would send economic shock waves which would devastate not just the employees of the Port Talbot plant (and others) but  the surrounding communities and related supporting businesses … thousands and thousands of working people… thrown on the scrap heap. It is blinkered short-termist politics at its worst. The Tories have seen this crisis looming for months and yet have failed to back British procurement for heavy industry, taking far too long to provide support for energy intensive businesses and fighting European Commission measures which could tackle the dumping of Chinese steel.

…the only answer is temporary nationalisation, the suspension of state aid rules, the long-term imposition of punitive tariffs on China, and the taxpayer injecting millions a year into the industry until it turns around – Paul Mason 

Britain will always need the capacity to produce steel. Its essential for the sort of long term strategic investment in infrastructure our government needs to be engaging in. If the Tories truly are the party of builders they have to put their money where their mouth is. Otherwise, as they say words are cheap… like steel is right now…

By Frederick Antonio Gallucci | International Law LLM | @gibblegbble

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2 thoughts on “Strategic Thinking, Tata Steel and the EU

  1. Blaming everything on China is to lie to the British people about what is really happening. We have a glut of commodities and that’s why prices have been collapsing across the board. It’s nothing to do with China. It’s the world capitalism system which is over producing and investing in the wrong areas.

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