Agenda: We are paying a heavy price for our cosy relationship with China
The troubling news from Port Talbot and other key steelmaking communities across Britain can hardly be described as a wake-up call. British production of steel has been steadily declining over the past decades and in 2015 more than 5,000 jobs were lost in this sector, including 250 in Motherwell and Cambuslang. However, Tata Steel’s decision to sell off its British operations could well be the final nail in the coffin for this once-proud industry.
But how did we get here? Despite the British Government’s protestations, this isn’t just the free market at work.
Across Europe there are more than 40,000 fewer jobs in the steel industry compared to 2007. This is in a large part down to unfairly cheap imports from China, which is dumping its overproduction onto the EU market at rock-bottom prices. The OECD estimates that it has built up more than 400 million tonnes of excess capacity – twice the EU’s annual steel production – and it is selling it at around half the price of its EU competitors.
Dumping, simply put, is where you sell your products abroad at an artificially lower price than you would on your home market. Those who are familiar with the Chinese economy will tell you that the government intervenes on a massive scale, therefore depressing the prices of its products abroad. This has been exacerbated in recent years because of the slowdown in its domestic economy as it looks for new markets.
In Britain, the Government’s recent relationship with China has been cosy. It rolled out the red carpet last October and gave President Xi Jinping a royal welcome. This week we hear that the First Minister signed in March a £10 billion deal with a Chinese consortium, apparently in secret.
Investment should be welcomed as part of a broader economic policy. However, dealing with such a large economic partner also brings risks, especially when its economic model doesn’t abide by our market rules. The steel crisis is further evidence of China simply not playing ball.
This is why at the EU level we have to be more cautious. Of course China is an important world player and greater economic cooperation can bring benefits to both sides. However, we must make sure our relations are based on a level playing field.
For one, this means improving the EU’s trade defence measures so that cases can be more promptly and effectively dealt with. To this end, one of the major stumbling blocks has been a group of member states (led by the UK) that have vetoed attempts to give the EU more teeth.
Whether they were unwilling to displease their new Chinese friends or, equally lamentably, unable to back up Brussels in the context of a toxic atmosphere of Euroscepticism at the heart of government, we do not know. However, the UK Government must now see the link between that inaction and the present crisis.
Secondly, it means refusing to grant China what is called “Market Economy Status” (MES) at the World Trade Organisation (WTO) under the present circumstances. Doing so would further threaten the impact that our trade defence measures can have in protecting our industry and jobs from unfair competition. Some estimates predict that up to 3.5 million European jobs are at risk if this little-known measure goes through. Judged by the commission’s own rules, China clearly does not qualify as a “market economy”. For these reasons as socialist and democrat MEPs we urge the commission not to automatically recognise China as a market economy before a comprehensive impact assessment is carried out into its possible effects.
For now, however, these measures will come too late for the people of Port Talbot, Redcar, Rotherham and other towns whose industry is at risk from unfair foreign competition. The loss of skilled jobs will hit these places hard and they are ill-equipped to deal with the aftermath. The ball is firmly in the court of the UK Government to take responsibility and minimise the devastation to these communities.
Looking forward, it is clear that the EU could and should do more to protect European industry from this kind of disaster. The short-sighted economic thinking of this Conservative Government has been a major obstacle. Perhaps this is the shock it needs to develop a proper industrial strategy that will deliver sustainable jobs in manufacturing for future generations.
David Martin is a Labour MEP for Scotland.