Peter Kyle, the UK’s business secretary, is set to express his concerns regarding the European Union’s plans to significantly cut tariff-free imports of British steel during a meeting with EU trade commissioner Maroš Šefčovič in Brussels on Friday.
The UK steel sector has previously indicated that the proposed new quota system by the EU could have “devastating” effects, as it aims to reduce overall tariff-free imports from non-EU nations by 47% based on 2024 figures, starting July 1.
This discussion occurs amidst worries from EU industry leaders about potential retaliatory actions from the UK that could adversely impact their exports to Britain. While the UK was part of the EU’s former steel safeguards framework, it must now establish its own quota and tariff regulations as of July 1, following Brexit.
The European Steel Association, Eurofer, has already communicated its objections to Šefčovič, arguing that the UK is imposing “extremely low” quotas, which would allow the EU to receive only 9% of its previous hot coil imports, 4% of tin mill products, and 3% of merchant bars.
In a letter, Axel Eggert, Eurofer’s director general, noted that the UK’s provisional quotas could lead to an 80% reduction in exports of organic coated products, along with a 45% decrease in rebar steel and a 38% drop in steel rails.
These protective measures are being implemented on both sides of the English Channel to shield their respective industries from competition posed by China.
However, the EU’s decision to halve foreign imports and the UK’s intention to reduce them by 60% has raised concerns that both regions may experience significant collateral damage, while China may adapt by shifting from raw steel exports to finished steel goods.
Several third-party nations, including the UK and Ukraine, have expressed dissatisfaction, according to an EU source.
Another EU insider indicated that while it was expected for the UK to have lower tariff-free export limits, the impact would be felt more acutely by London.
“These quotas will incur economic costs for both parties, with slightly more burden on the UK,” stated an EU diplomat.
UK steel industry representatives emphasize that the British government’s 60% quota reduction is adaptable and could be modified if the EU reciprocates, in contrast to the EU’s stringent 50% cap.
They are concerned that the European Commission is seeking a “mathematical solution” to comply with regulations, warning that it is in the EU’s interest to favor a fellow European ally that adheres to the rules.
“If the UK’s share of the overall import quota is diminished, it merely allocates a larger portion for non-European countries. Is that the EU’s intention?” questioned a UK steel executive.
These issues arise as hopes diminish for the establishment of a strategic “steel club” alliance between the EU and the UK, which would facilitate tariff-free trade and collaboration against China.
One EU diplomat remarked, “We anticipated that the US would engage more swiftly than they have. However, the US has shown little interest in assisting the UK or the EU and remains indifferent regarding the concept of a steel club.”
Kyle’s meeting with Šefčovič aims to address the escalating tensions between the UK and the EU.
Eggert expressed hope that the UK’s proposed drastic reductions were merely a negotiation strategy leading to a “mutually beneficial” resolution.
He acknowledged, “A total elimination of export reductions from the UK is unfeasible; the UK will indeed have a lower quota,” while asserting that “the UK should certainly receive preferential treatment” compared to its competitors. “Our industries are highly interconnected,” he concluded.
