The Budget, the National Living Wage and now the future of the British steel industry. These major news stories have all been given an added dimension because of the referendum debate.
Much has already been written on the Government’s opposition EU tariffs on Chinese steel, as well as UKIP’s voting record in the European Parliament. However there has been very little clarity on what EU competition laws mean for British steel.
On the face of it EU rules on State Aid preclude any intervention by the Government to save a failing firm. As with most EU legislation the reality is a lot more complicated. Written into the rules is a ‘get out clause’ that allows for state intervention when the benefits to the economy as a whole mitigate any anti-competitive effects. This is how European governments, including our own were able to nationalise major financial institutions and thus prevent an economic meltdown without opposition from the Commission.
This is a more difficult argument to make given the relatively smaller size of the British steel industry. However there are other ways in which the Government could intervene without contravening the rules such as through research and development grants or mitigating the effects of the emission trading scheme.
Another possibility that as far as I am aware has received little or no attention is to actually use EU competition laws to protect British steel. This may seem a contradiction in terms, to understand how this is possible we must look at the state of the steel industry.
In response to a fall in domestic demand Chinese steel producers have flooded European markets with their excess supply. This dumping exercise has led to prices with which British Steel are unable to compete. However this does not represent the operation of a competitive and fair market. Chinese supply of steel is kept artificially high by state intervention meaning they are acting in an anti-competitive manner. Since they are operating in the single market, the Commission may be justified pin investigating their practices. While this would be a drawn out process with an uncertain outcome it may give British Steel the breathing space needed to restructure and recover.
There are many reasons feeding into the current problems facing British Steel, none of these would be solved by a Brexit. Indeed British Steel as a major actor in the European market place would probably still be subject to EU regulations on State Aid. By going after multinational corporations such as Google and Microsoft to name just two, EU Competition rules have protected consumers in a way domestic agencies would not have and thus is another reason Britain is stronger in the EU.