The UK business secretary, Peter Kyle, is set to meet EU trade commissioner Maroš Šefčovič in Brussels on Friday to raise concerns about EU plans to dramatically reduce tariff-free imports of British steel. The UK steel industry has previously warned of 'devastating' consequences from the new quota system, which will cut overall tariff-free imports from non-EU countries by 47% on 2024 levels from 1 July.
Background of the Dispute
The EU's proposed changes would almost halve the amount of steel that can be imported tariff-free from the UK. This move has sparked fears of retaliatory measures from the UK, which must design its own quota and tariff regime by 1 July after leaving the EU's previous steel safeguards regime post-Brexit.
Industry Reactions
The European Steel Association, Eurofer, has already written to Šefčovič protesting that the UK is setting new quotas for the EU at 'extreme low levels'. According to Eurofer director general Axel Eggert, the UK's provisional quotas would slash EU exports of organic coated products by 80%, rebar steel by 45%, and steel rails by 38%. The EU's quotas for the UK would see hot coil imports at only 9% of previous levels, tin mill at 4%, and merchant bars at 3%.
Both sides are introducing safeguards to protect their industries from competition from China. However, the EU's decision to slash foreign imports by 50% and the UK's by 60% is fueling fears of serious collateral damage. China may find workarounds by pivoting from raw steel exports to finished steel products.
Political and Diplomatic Tensions
Several third countries, including the UK and Ukraine, are expressing displeasure, according to EU sources. One EU diplomat noted that the quotas will bring economic costs for both sides, with slightly higher costs for the UK. UK steel industry sources argue that the British government's 60% reduction is flexible and can be changed easily if reciprocated by the EU, whereas the EU quota is strictly capped at 50%.
There are concerns that the European Commission is approaching the issue looking for a 'mathematical solution' to show compliance with rules. A UK steel executive warned that reducing the UK's share of the overall quota would give a larger slice to non-European countries, questioning whether that is what the EU wants.
Prospects for a Steel Club Alliance
The problems have emerged amid fading hopes for a strategic 'steel club' alliance between the EU and the UK, which would involve tariff-free trade and cooperation against China. One EU diplomat lamented that the US has not engaged quickly enough and is not interested in helping either side, sitting on the fence regarding the steel club idea.
Kyle is scheduled to meet Šefčovič on Friday morning to address the growing tensions. Eggert expressed hope that the dramatic reductions proposed by the UK are a negotiating tactic before a mutually beneficial settlement is agreed. He acknowledged that a zero reduction is not possible but emphasized that the UK should receive preferential treatment due to their interconnected economies.
