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30 March 2016

The big question around steel that no one is asking

The argument about what happens next is missing something.

By Stephen Bush

Tata Steel has announced it will sell off its British arm, throwing the future of the British steel industry into doubt. Tata runs steelworks at Port Talbot, Rotherham and Corby, employing 15,000 workers, with many more people involved both in servicing the steelworks and its employees.

Both the European Union and the government are coming under fire for Tata Steel’s decision. Leave campaigners blame European rules on state aid – the EU restricts subsidies to steel, as overproduction of steel by “national champions” is a persistent problem of the European economy. But there is plenty of room for manoeuvre – the Italian governmemt subsidies steel under the guise of “environmental protection” and the British government could do the same if it wished to, whether inside or outside the EU.

But the question of whether or not Britain should step in to protect the steel industry is more finely balanced than it seems. The closure of the steelworks would have drastic effects on the local economies affected and the lives of the people who work there. But closure wouldn’t have lasting effects on the British economy as a whole. And British steel’s path to profitability is a tricky one – as long as China continues to dump heavily subsidised cheap steel on the international markets, the price of steel will remain artificially low, meaning that if the British government does decide to subsidise British steel, they may have do it for a long time, raising the question of whether the money would be better spent on moving the economies of Port Talbot, Rotherham and Corby and retraining the area’s workers. 

But the big question that neither the Conservative government nor its opponents seem to be grappling with is the very fact of the Chinese steel-dumping that is putting British steel under such pressure. If Britain can trust China, it may have little to fear from outsourcing steel production to that country. If it can’t, how worried should we be?

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