Why do we need UK steel safeguards?

All the reasons why safeguards were first introduced are not only still in place, but conditions have in fact deteriorated. Steel safeguards remain necessary to shield the UK from rising global excess capacity and the inevitable trade diversion resulting from US Section 232 tariffs and the EU’s own safeguards.

The OECD reported global steelmaking overcapacity at 630 million tonnes in 2022 – this corresponds to 33% of global steel production and is over 60 times the size of the UK market. Much of this is fuelled by state subsidies, for example in China, India and the Middle East.

Even a small proportion of this surplus material ending up in the UK would completely overwhelm the UK market. Most of these imports will be of high-emission steel, particularly as the UK’s CBAM will not be implemented before 2027. These imports will be directly undermining the UK’s decarbonisation efforts and the UK steelmakers’ investments in Net Zero steelmaking.

What are safeguards?

Safeguards are a type of trade remedies measure intended to address unexpected surges in imports that are damaging or threatening to damage domestic producers. Safeguards can take various forms but the most common is a tariff-free quota – this allows the continuation of tariff-free imports at the same level or higher as the period before the safeguard was introduced.

Why do we have UK steel safeguards?

The UK inherited its steel safeguards from the EU which introduced its own equivalent measure in 2018 principally to guard against import diversion from the US after the introduction of Section 232 tariffs by President Trump.
This raised the risk that much of this steel would be diverted to other markets, with the EU being a prime candidate as the largest tariff-free market for steel in the world.

What happens if imports go above the safeguards quota?

It is only if the imports go above the quota level that a tariff is applied to further imports. Quotas are calculated based on historical imports. Safeguards must be applied equally to all imports rather than target specific countries, with the exception of developing countries with a low import share.

How have the US and EU been protected?

The US measures, still in place today, introduced a 25% tariff on all steel imports with an aim to significantly reduce the 30 million tonnes of steel that were imported into the US each year.
The EU Commission, with the support of the UK Government, introduced steel safeguards to guard against this risk as well as to address long-standing concerns about global overcapacity of steel production, state intervention and market distortions in many countries.

How did safeguards transition to the UK?

The UK transitioned the steel safeguards into UK law in January 2021 followed by an investigation by the Trade Remedies Authority (TRA) to determine whether the measure should remain in place. Of the 19 products reviewed, the TRA recommended maintaining the measure for 10. Following intervention by the Secretary of State, an additional 5 products were also included.

Why do UK steel safeguards get reviewed?

The current safeguard measures are due to expire in June 2024, with the option of being extended for a maximum of another two years. The purpose of the extension review is to assess whether injury to the UK industry would occur should the measures be left to expire in June 2024.

Secretary of State

The UK’s trade remedies framework has been reformed and now provides greater discretion to the Secretary of State to determine its outcome.

Global steel overproduction

The OECD reported global steelmaking overcapacity at 630 million tonnes in 2022. This corresponds to 33% of global steel production and is over 60 times the size of the UK market.

Threat of import diversion

Even a small proportion of surplus material ending up in the UK would completely overwhelm the UK market. Most of these imports will be of high-emission steel, particularly as the UK’s CBAM will not be implemented before 2027.

Trade Remedies Authority

February 2024: Recommendation from the TRA to extend UK steel safeguards until June 2026.

Secretary of State for Business

The Secretary of State, Kemi Badenoch, will announce approval or not of the steel safeguards extension.

Potential extension of safeguards for steel

The steel safeguards could then be applicable until June 2026.

Steel safeguards will expire

Steel safeguards will expire, if approved by the Secretary of State, in June 2026. WTO rules specify that safeguards can be applied for a maximum of eight years.

Need for new shielding measures

Safeguards cannot be reapplied for a period equivalent to however long they have been in place for. It is likely that due to global steel overproduction there will be further shielding measures needed.