Welsh Affairs Committee – Steel Evidence Session
Wednesday 10th February 2016
Last Wednesday I questioned Anna Soubry the Minister for Small Business, Industry and Enterprise on steel during the Welsh Affairs Committee.
SK: Thank you Mr Chairman. Just a very quick question to start off. Do you agree that giving Market Economy Status to China would reduce the scope for taking antidumping actions against China?
SK: Why not?
AS: Russia has Market Economy Status. It doesn’t prevent us putting tariffs and indeed sanctions on them. I think it is really difficult that we don’t see market economy status for China and treat it as a red herring. It is a red herring.
SK: That is interesting, because that is diametrically opposed to what Tata Steel have just said to us.
AS: Well, with great respect to Tata, I hear them, and I have that conversation with Gareth Stace, and in fact we have had a very good debate about it. But we know what the evidence is, and the evidence is that countries like Russia, who have Market Economy Status, have tariffs put against them. My view, it is the view of the government, is that in any event this will be a decision that will be made by the EU. They will look at the evidence before agree or disagreeing. But it is not a bar to tariffs nor indeed sanctions to have Market Economy Status. But I have made it very clear – I have said it on the floor of the House of Commons – that China, if it wants to be in the game, has got to play by the rules and has got to be seen to be playing by the rules.
SK: So given that 70% of the Chinese steel industry is owned by the Chinese government, do you believe that China is a market economy?
AS: Oh, look, I’m, honestly. I don’t know, I’m not going to try and sit, I don’t know. I’m sorry, its not my field of, look, I’m not just going to sit and come out with answers when I don’t have a basis to make that answer. Maybe there is something in my pack, but I’m not flicking through my pack Mr Davis and just reading out answers. I don’t think the committee would want that. But I think there is a good argument for it.
SK: If the British government doesn’t know whether or not China is a market economy then why is the government supporting Market Economy Status?
AS: Oh no, sorry, no, do forgive me. Sorry, you asked me, so the government, probably, is moving, the Chancellor of the Exchequer has said that there is a good case for China to be granted Market Economy Status. Frankly he knows more about these things than I do and I’m not going to sit and try to pretend to answer the questions to which I don’t know the proper answers to.
SK: So the lead on who defines what the British government thinks about China’s application for Market Economy Status is the Chancellor of the Exchequer?
AS: No, I didn’t say that and you know I didn’t, you are being naughty.
SK: Who is leading on that? Who is defining that government position?
AS: It doesn’t work like that. I know that there are people like the Chancellor, and I take the view that the Chancellor is extremely well versed in economic matters and he and other people think that there is a very god case for China to have market economy status. Do I listen to the Chancellor of the Exchequer? Yes. Do I trust his advice? Yes. If he says it is worthy of Market Economy Status then he is probably absolutely right.
SK: So despite the fact that China only complies with two out of the five criteria of what it means to be a market economy, according to the WTO, the British government and the Chancellor of the Exchequer still think that China should be a Market Economy?
AS: I don’t know. I’ve come to talk about the steel industry. I appreciate that MES is important, but as I said at the outset
SK: It is of direct relevance
AS: As I said at the outset, it is a red herring Mr Davis, it is a red herring.
DD: But all of the other witnesses have said it is important?
AS: Well they are entitled to their opinion, but I think it is a red herring because as I said at the outset, if China has Market Economy Status it does not preclude it from having tariffs and sanctions taken against it and that is why I think it is a red herring. And I think that turning all the gun power onto China and Market Economy Status is a misplacing of the gun fire. Now, looing at whether or not it dumps its steel. And what I am sure you probably don’t want to talk about, Mr Kinnock, is the fact that for the first time this government has already voted, on two occasions, in favour of anti-dumping measures to protect out steel industry and that has never happened. It was on this governments watch and I am proud to have been the minister to have made that decision.
SK: I did actually want to come directly onto the issue of the European Commission’s position on dumping and Trade Defence Instruments. And to welcome the letter that the SoS for Business, Innovation and Skills has sent, along with a number of his counterparts. I think this is a massive step in the right direction and I would like to thank you Minister and the SoS for taking that very important step. But there is one issue within that that I would like to probe a little further. And that is on the Lesser-Duty Rule. We know that there are two types of tariff that can be applied when it has clearly been established that a product has been dumped. The EU default position is to apply the lesser of those two duties. We also know that there is a move to scrap the lesser duty rule and to more towards a system that looks more like the American one where they go for the higher tariff. I think that would be a huge step in the right direction for the British Steel Industry. But we also know that the British government along with a couple of other governments in the EU are strongly opposed to scrapping the Lesser Duty Rule. So could you explain how it is possible to reconcile those two positions? So on the one hand you say you are standing up for British steel but on the other you are not campaign to scrap the Lesser Duty Rule.
AS: I think it is really important that we judge each case on its own merits. So, in relation to rebar, for example, we are absolutely with our European Union colleagues, in fact we are leading the charge that it should have the higher tariff. If you look at dumping there are were the two instances to which I have referred where we voted in favour of tariffs. And then there was another instance where we didn’t, where we abstained. And the reason we abstained – I have the exact details of the nature of that – but the most important point is that it was a really difficult call. On the one hand you had my determination to do everything possible to defend the British steel industry. And on the other hand we had extremely strong representations – and I mean seriously strong and I checked them out – from people who use that particular type of steel and they said ‘if you vote in favour and there are tariffs we will go out of business. End of conversation. It will take us out of business’. So that was a very difficulty call and that is why each case has to be judged on its own merits. In that instance I said that, frankly with this pull between the two, with respected businesses employing people who said ‘if you do this and we have tariffs put on which mean we can’t buy it, we will have to make hundreds of people redundant.’ And in that instance we therefore decided to abstain.
Division Bell. Meeting suspended for 10 mins.
SK: Thank you very much Chair. I think we were just in the middle of talking about the Lesser-Duty Rule. There is a quote from the letter that the SoS for BIS has sent along with his counterparts in which he voices his support for “modernizing trade defence instruments in a manner which recognizes the importance of free but fair trade to the European economy”. I think that is absolutely right, and so I am just wondering how that can be reconciled with the British Government opposing the scrapping of the Lesser-Duty Rule.
AS: No, I don’t think it is as simple as that at all Mr Kinnock. I was explaining earlier, Mr Davis – and I now have in front of me and I am very grateful to my officials – we abstained on grain orientated electrical steels. They are produced in Newport and that was a difficult one. We had the UK transformer producers saying to us ‘if you vote this will have severe and profound consequences for our industry. It will mean hundreds of British jobs go.’ How do you square that one? And in the event we abstained. And that is quite a brave thing to do because, and I am very aware of the political storm that has been whipped up, probably understandably, about the future of the British steel industry and indeed the Welsh steel industry, but it would have been dishonest of us not to have taken that approach, trying to get the balance right. That is what we are trying to do. And so on rebar we are absolutely going for the higher tariff. I have been to Celsa, I know the difficulties under which they struggle, I know about the produce that they make and I have no difficulty in, and nor does my SoS – and he has been leading the charge. He has absolutely led the charge. He called the emergency meeting, and I am going back for the EII meeting in Brussels on Monday. We are leading the charge in the European Union to make sure that, working together, that we do the right thing for the steel industries across all of our nations.