EU under pressure to scrap ‘lesser duty rule’ on steel imports

Pressure is mounting on the EU authorities to scrap the ‘lesser duty rule’ that limits the size of the levies that can be imposed on steel imported from China and other markets, which the European steel industry argues greatly limits the effectiveness of the tariffs.

Europe’s steel industry has suffered heavily from global overcapacity (steel production is around a third higher than demand) and a glut of cheap steel, primarily from China on the European market. Around 7,000 jobs have gone in the industry — including over 1,000 from Tata Steel’s European operations — in the last eight months alone, while companies have been forced to mothball or close plants, and incur heavy financial losses.

The industry has been pressing the European authorities to lift the WTO rule that “authorities impose duties at a level lower than the margin of dumping but adequate to remove injury.” The EU’s application of the rule when it comes to slapping tariffs on steel from outside the EU has meant that the rates applied to specific types of steel are far lower than that applied by other countries such as the US.

In a debate on Monday, British MPs called on the government to push for the removal of the rule and the speeding up of the processes by which a tariff is imposed (currently at least 10 months), saying this was needed to “preserve a future for the UK steel industry”.

“After months of agitation and a massive increase in Chinese imports, especially to the UK, the European Union has finally set its tariff on a particular product — Chinese rebar — between 9.2 and 13 per cent. Meanwhile, the US has introduced defensive tariffs of 66 per cent, and they were operating 45 days after the start of its investigation.

“To work, tariffs have to be high enough to deal with the problem — the EU tariffs are not,” said Angela Eagle, Labour’s spokesperson on business during Monday’s debate. “It is important to make it crystal clear that we are objecting to blatant and unfair dumping, not to free trade.”

The British government has rejected the proposal, arguing that higher levies are possible within existing EU rules, and that the lifting of the rule would have harmful consequences. “Punitive tariffs and sky-high duties always seem like a nice, easy solution, but the truth is that excessive, protectionist trade tariffs simply do not work,” warned Sajid Javid, Minister for Business, Innovation and Skills. “Although they provide a short-term boost for the protected sector, they inevitably cause long-term harm to the wider economy. They drive up prices.”

The debate came as the EU’s Competiveness Council met in Brussels to discuss the state of the steel industry. While the council issued a statement urging steps, including the speeding up of anti-dumping measures and the avoidance of unnecessary regulation, industry experts and politicians expressed their concern about the lack of commitment to concerted action and the failure to mention the ‘lesser-duty rule’.

“The council holds the future of the steel industry in its hands and by refusing to address its urgent needs today has shown a tremendous lack of commitment,” warned Dan Nica, spokesman for energy and industry for the Socialist and Democrats group in the European Parliament.

“Applying the ‘lesser duty rule' to each and every dumping investigation simply reduces anti-dumping measures/tariffs to levels that blatantly fail to restore a fair import price in the EU steel market. Other economies do not grant such a favour to unfair imports. So why does the Council refuse to see the damage that the 'lesser duty rule' is having, day in day out, on the European steel sector,” said Axel Eggert, Director-General of the European steel industry body Eurofer, ahead of the debate.

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