Wednesday, 4 April 2018

Protectionism


Trump and steel/aluminium tariffs - although it pains me to say so, I have a degree of sympathy for him a bit on this. Competition is all well and good, but China dumping excess production on the market is not fair competition when Chinese wages are much lower than those in the US and the steel and aluminium is being sold at below the Chinese domestic price. Putting tariffs on all steel, including the EU, is over the top and isolates the USA. A punitive tariff of over 200%, however, is plain daft and is not creating an even playing field and is inviting a trade war,

The Chinese practise is an object lesson in why no nation can simply drop tariffs on all imports, as Rees-Mogg and his cronies are advocating. Protectionism has its place, especially where the competitive field is not level.

Trump should be gathering global support for reasonable tariffs on Chinese steel and aluminium, as that's the only way in which unfair dumping can be brought under control. In 2016 the EU imposed import duties of between 13.2% and 22.6% on Chinese hot-rolled steel, which is used in pipelines and gas containers, and 65.1% and 73.7% on heavy plates, which are used in civil engineering projects. There didn't seem to be as much of an uproar about this, probably because the EU tariffs we not as punitive as the US ones and were part of a negotiated deal.

In early March of this year the levies were renewed for a further 5 years. Perversely, the UK government lobbied against these measures, which did not go down well with UK steel producers, and Tata Steel in particular, whose very existence in Port Talbot was under threat over Brexit when potential new buyers pulled out following the referendum. It's only the EU tariffs that have led Tata to continue to support the Port Talbot plant.


It's amusing that the Daily Mail is garnering support for the new blue passport contract to be given to the British company, De La Rue (ironic name), as a patriotic act that will result in an extra £120m cost to the taxpayer - which will be used to plug its pension fund gap. This is when the DM is an arch proponent of Brexit and dropping import tariffs a la Rees-Mogg and Mindford and risking British jobs in the process. Their argument is couched in philanthropic (aiding 3rd world farmers) and overall economic terms (lower shop prices), but ignores the effect of lost jobs and increasing wealth inequality.

There's nothing wrong with a bit of protectionism where there's an imbalance of competition in terms of wages, labour conditions, state aid, specification and product safety - that's what the EU is all about. That is also why the EU is against state aid, as indeed is the WTO - it distorts the market.


No comments:

Post a Comment