The UK business secretary, Peter Kyle, is to raise concerns about EU plans to dramatically reduce tariff-free imports of British steel with its trade commissioner, Maroš Šefčovič, in Brussels on Friday.
The UK steel industry has previously warned of “devastating” consequences from the new quota system being planned by the EU, which will cut overall tariff-free imports from non-EU countries by 47% on 2024 levels from 1 July.
Kyle’s meeting comes as industry leaders on the EU side worry about retaliatory measures by the UK affecting their own sales to Britain. The UK was part of the EU’s previous steel safeguards regime but after Brexit must design its own quota and tariff regime, also for 1 July.
European Steel Association Eurofer, the EU trade industry body, has already written to Šefčovič to protest that the “UK is setting new quotas for the EU at extreme low levels” with the EU only getting 9% of its previous levels of hot coil imports, 4% of tin mill, and 3% of merchant bars.
In his letter, the Eurofer director general, Axel Eggert, said that the UK’s provisional quotas would slash their exports of organic coated products by 80% with rebar steel down 45% and steel rails down 38%.
The safeguards are being introduced on both sides of the Channel as an attempt to protect their industries from competition from China.
But the decision by the EU to slash foreign imports by 50% and the UK to cut them by 60% are fuelling fears that both sides will suffer serious collateral damage while China will find workarounds by pivoting away from raw steel exports to finished steel products.
Several third countries, including the UK and Ukraine, are “expressing displeasure”, said one EU source.
Another EU source said it was inevitable the UK’s tariff-free export limits would be lower for all but that more pain would be felt by London.
“They [the quotas] will bring economic costs for both sides and will bring slightly higher costs for the UK,” said one EU diplomat.
Sources in the UK steel industry point out that the British government’s 60% reduction in quotas is flexible and can be changed easily if reciprocated by the EU, whereas the EU quota is strictly capped at 50%.
They fear that the European Commission is approaching the issue looking for a “mathematical solution” to show they are following the rules and warn that it is in the EU’s interests to give preferential treatment to a fellow-European and rules-based ally.
“If the slice of the overall quota of imports is reduced for the UK, it simply gives a big slice of the quota for non-European countries. Is that what the EU wants?” said a steel executive in the UK.
The problems have emerged amid fading hopes that the EU and the UK could forge a strategic “steel club” alliance in which they would give each other tariff-free trade and work together against China.
One EU diplomat added: “We hoped the US would engage more quickly than they have. But the US is not interested in helping the UK or the EU. They have been sitting on the fence on the idea of a steel club.”
Kyle is scheduled to meet Šefčovič on Friday morning to address the growing tensions between the UK and the EU.
Eggert said he hoped the dramatic reductions proposed by the UK were a negotiating tactic before a “mutually beneficially” settlement is agreed.
He said that “a zero reduction in exports from the UK is not possible, the UK will have a lower quota,” adding that “the UK should definitely get preferential treatment” over rivals. “We are so interconnected,” he said.