The battleground over Chinese steel

What's the truth behind the accusations that have been flying about the level of political protection given to the steel industry in Wales?

The UK government insists it's doing all it can while opponents have accused it of betrayal and inaction.

The main difference between the two sides is that ministers at Westminster believe tariffs on Chinese imports can be increased by the European Commission using existing rules, while others have called for a more fundamental change by scrapping something that you've probably never heard of called the lesser duty rule.

The department for business in London says the EU-wide rule is designed to prevent disproportionate and excessive tariffs, instead it means that tariffs are only put in place which return the situation to a level playing field.

In other words, you don't end up with a situation like last week in the US which introduced a 266% tariff on coiled steel imported from China; the equivalent tariff in the EU at the moment is 16%.

Fear

The fear among ministers is that it opens the door to protectionism, which they believe will raise prices across the board, and eventually lead to a trade war.

It also believes that talk about reforming the lesser duty rule won't bring about the kind of short-term help the industry needs.

In stark contrast, the steel industry believes the lesser duty rule acts as a fundamental barrier.

Dominic King from the trade body UK Steel, appearing before the assembly's enterprise committee, accused the UK government of being among the ringleaders blocking higher tariffs because of its support for the rule.

He explained why he wants it scrapped: "It basically always picks the lower amount.

"So, if it works out injury of between, say, 14% and 66%, it will always go for the 14 per cent, which even the business Minister in the UK said in two cases recently, one on re-bar and one on cold-rolled coil, weren't big enough.

Dumping

"But the problem is, then, going and trying to change that at an EU Commission level doesn't really happen.

"It's very hard, when they've made a provisional decision, to actually reverse that decision and put the duties up, whereas, if there was no lesser duty rule, you'll put the higher margin up. Karl Koehler (managing director of Tata steel in Europe) has recently said the EU is basically holding up a sign saying, 'Please dump here; you're welcome.'"

The clear message there is that reform within the existing rules, and there are 12 anti-dumping investigations being carried out by the European Commission into cheap Chinese steel, won't be effective.

And the clear message from the UK government also is that it's not prepared to give up on some of its free-market principles as the debate on steel hots up.