{"id":6065,"date":"2021-07-08T13:03:45","date_gmt":"2021-07-08T12:03:45","guid":{"rendered":"https:\/\/blogs.sussex.ac.uk\/uktpo\/?p=6065"},"modified":"2021-07-08T13:55:41","modified_gmt":"2021-07-08T12:55:41","slug":"safeguard-tariff-rate-quotas-on-steel-imports","status":"publish","type":"post","link":"https:\/\/blogs.sussex.ac.uk\/uktpo\/2021\/07\/08\/safeguard-tariff-rate-quotas-on-steel-imports\/","title":{"rendered":"Safeguard tariff rate quotas on steel imports: The Computor says \u2018no\u2019, but the Government says \u2018yes\u2019"},"content":{"rendered":"<em>Share this article: <\/em> <a class=\"synved-social-button synved-social-button-share synved-social-size-32 synved-social-resolution-single synved-social-provider-facebook nolightbox\" data-provider=\"facebook\" target=\"_blank\" rel=\"nofollow\" title=\"Share on Facebook\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fblogs.sussex.ac.uk%2Fuktpo%2Fwp-json%2Fwp%2Fv2%2Fposts%2F6065&#038;t=Safeguard%20tariff%20rate%20quotas%20on%20steel%20imports%3A%20The%20Computor%20says%20%E2%80%98no%E2%80%99%2C%20but%20the%20Government%20says%20%E2%80%98yes%E2%80%99&#038;s=100&#038;p&#091;url&#093;=https%3A%2F%2Fblogs.sussex.ac.uk%2Fuktpo%2Fwp-json%2Fwp%2Fv2%2Fposts%2F6065&#038;p&#091;images&#093;&#091;0&#093;=http%3A%2F%2Fblogs.sussex.ac.uk%2Fuktpo%2Ffiles%2F2017%2F01%2FAlan-Winters-100w.jpg&#038;p&#091;title&#093;=Safeguard%20tariff%20rate%20quotas%20on%20steel%20imports%3A%20The%20Computor%20says%20%E2%80%98no%E2%80%99%2C%20but%20the%20Government%20says%20%E2%80%98yes%E2%80%99\" style=\"font-size: 0px; 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width:32px;height:32px; margin: 0; padding: 0; border: none; box-shadow: none;\" src=\"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-content\/plugins\/social-media-feather\/synved-social\/image\/social\/regular\/64x64\/linkedin.png\" \/><\/a><a class=\"synved-social-button synved-social-button-share synved-social-size-32 synved-social-resolution-single synved-social-provider-mail nolightbox\" data-provider=\"mail\" rel=\"nofollow\" title=\"Share by email\" href=\"mailto:?subject=Safeguard%20tariff%20rate%20quotas%20on%20steel%20imports%3A%20The%20Computor%20says%20%E2%80%98no%E2%80%99%2C%20but%20the%20Government%20says%20%E2%80%98yes%E2%80%99&#038;body=UK%20Trade%20Policy%20Observatory%20blog:%20https%3A%2F%2Fblogs.sussex.ac.uk%2Fuktpo%2Fwp-json%2Fwp%2Fv2%2Fposts%2F6065\" style=\"font-size: 0px; width:32px;height:32px;margin:0;margin-bottom:5px;\"><img alt=\"mail\" title=\"Share by email\" class=\"synved-share-image synved-social-image synved-social-image-share\" width=\"32\" height=\"32\" style=\"display: inline; width:32px;height:32px; margin: 0; padding: 0; border: none; box-shadow: none;\" src=\"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-content\/plugins\/social-media-feather\/synved-social\/image\/social\/regular\/64x64\/mail.png\" \/><\/a><p><em>8 July 2021<img loading=\"lazy\" class=\"alignright size-full wp-image-501\" src=\"http:\/\/blogs.sussex.ac.uk\/uktpo\/files\/2017\/01\/Alan-Winters-100w.jpg\" alt=\"Image of Alan Winters\" width=\"100\" height=\"130\" \/><\/em><\/p>\n<p><em>L. Alan Winters is Professor of Economics and Founding Director of the UKTPO.<\/em>\u00a0<em>Guillermo Larbalestier is Research Assistant in International Trade at the University of Sussex and Fellow of the UKTPO.<\/em><\/p>\n<p>On 1<sup>st<\/sup> June 2021, as part of its post-Brexit trade architecture, the UK Government launched the Trade Remedies Authority (TRA). On 11<sup>th<\/sup> June the <a href=\"https:\/\/www.trade-remedies.service.gov.uk\/public\/case\/TF0006\/submission\/187accc2-e0e6-40b7-8d2f-fdc9b10d536d\/\">TRA recommended<\/a> the extension of only some of the quotas and tariffs on steel imports that the UK had inherited from the EU. On 30<sup>th<\/sup> June, one day before these measures were due to expire, the <a href=\"https:\/\/www.gov.uk\/government\/publications\/trade-remedies-notice-safeguard-measures-on-certain-steel-products-application-of-tariff-rate-quotas\">Government rejected the TRA\u2019s recommendation<\/a> and extended the policies on several categories of steel for which the TRA had recommended the revocation. It also announced <a href=\"https:\/\/committees.parliament.uk\/committee\/367\/international-trade-committee\/news\/156318\/international-trade-committee-chair-writes-to-liz-truss-on-steel-safeguards-and-trade-remedies\/\">a review<\/a> to check whether the TRA was \u2018fit for purpose\u2019. What was going on? And does it matter?<\/p>\n<h3><!--more-->Background<\/h3>\n<p>The TRA was created by the Trade Act, 2021. Its principal task is to advise the Government on so-called Trade Remedies \u2013 the imposition of temporary restrictions on imports in the face of unfair trade (resulting from dumping or subsidies) or unforeseen shocks (safeguards) which cause injury to UK producers. It does so in the light of proven facts about trade and production conditions, having sought evidence from interested parties (which it checks for credibility) and having made an objective balancing of the various interests \u2013 it is the \u2018computor\u2019 in the title of this blog. The Government may accept or reject the recommendation as whole, but not amend it; and if it rejects it, it must explain why to Parliament.<\/p>\n<p>Safeguard restrictions are permitted in the WTO on condition that they:<\/p>\n<ul>\n<li>respond to significant increases in imports that result from a previous trade liberalisation, were unforeseeable, and cause injury to local producers;<\/li>\n<li>are no more restrictive than necessary to alleviate the injury, are temporary and encourage adjustment by the affected industry;<\/li>\n<li>are non-discriminatory.<\/li>\n<\/ul>\n<p>Safeguards can comprise both quotas and import duties, including tariff rate quotas (TRQs) which impose tariffs, but exempt a given quantity of imports from them.\u00a0 TRQs are the tools used in this case of steel imports. The <a href=\"https:\/\/www.legislation.gov.uk\/uksi\/2019\/449\/contents\/made\">TRA\u2019s regulations<\/a>, mostly embodied in the <a href=\"https:\/\/www.legislation.gov.uk\/ukpga\/2018\/22\/contents\/enacted\">Taxation (Cross Border Trade) Act, 2018<\/a>, are broadly in line with WTO rules and practices.<\/p>\n<h3>A brief history<\/h3>\n<p>In March 2018, President Trump introduced 25% tariffs on US imports of steel and aluminium. One reaction to this was that other countries, including the EU, introduced safeguards on steel because, or in order to forestall, the exports excluded from the USA being diverted to their markets. This was no surprise: steel has always been subject to such temporary interventions. The <a href=\"https:\/\/eur-lex.europa.eu\/legal-content\/EN\/TXT\/PDF\/?uri=CELEX:32019R0159&amp;from=EN\">EU investigated<\/a> 28 categories of steel (covering over 300 8-digit product codes) and introduced TRQs on 26 of them definitively on 31<sup>st<\/sup> January 2019 \u2013 the outcome is summarised in Table 1 (column 5). The UK inherited these TRQs and at the end of the transition period on 1<sup>st<\/sup> January 2021 decided to maintain 20 of them, the remaining 6 being deemed to have no UK production and hence no case for safeguard.<\/p>\n<p>In October 2020, the Secretary of State for International Trade, Elizabeth Truss, requested the precursor of the TRA (the Trade Remedies Investigations Directorate, TRID) to investigate whether the inherited safeguards were appropriate (and implicitly legal) for the UK to extend beyond 30<sup>th<\/sup> June 2021.<a href=\"#_ftn1\" name=\"_ftnref1\">[1]<\/a> They did so by examining whether the UK had experienced a significant increase in imports during the investigation period used by the EU (2013-17).<a href=\"#_ftn2\" name=\"_ftnref2\">[2]<\/a> It also investigated more recent data to check whether imports were likely to surge if the TRQs were abolished and the extent of injury if they did.<\/p>\n<p>The TRID\/TRA collected submissions from many parties \u2013 largely from both upstream and downstream firms and business associations and traders. It issued a Statement of Intended Preliminary Decision (SIPD) on 19<sup>th<\/sup> May 2021 and collected further representations quickly thereafter. These altered their conclusions somewhat and they published their analysis and final recommendation on 11<sup>th<\/sup> June 2021. The documents are not an exciting read even for trade wonks, but they clearly convey the serious and thorough nature of the investigation including the evidence used and the analysis it supported.<\/p>\n<p>The TRA slightly altered the classification of the groups and made recommendations on 23 categories.<a href=\"#_ftn3\" name=\"_ftnref3\">[3]<\/a> Of these, they recommended extending the safeguard measures for 11 categories in their current form for three years with a small growth in the permitted quotas. The TRA identified unforeseen import growth, the likelihood of an import surge and sectoral injury if the TRQs were abolished. For 12 categories, on the other hand, the TRA recommended revoking the TRQs. Of the latter:<\/p>\n<ul>\n<li>3 because there was no evidence of UK production,<\/li>\n<li>5 because there was no increase in UK imports between 2013 and 2017,<\/li>\n<li>3 because the increase in imports was insignificant or was not shown to be causing injury, and<\/li>\n<li>1 because, although there was some evidence of injury, the TRA believed that continuing the restrictions would have limited the growth of using sectors to an unacceptable degree. (The last reflects a so-called Economic Interest Test.)<\/li>\n<\/ul>\n<p>On 30<sup>th<\/sup> June 2021, the Secretary of State rejected the TRA\u2019s recommendation and replaced it with her own partly underpinned by a bespoke <a href=\"https:\/\/www.legislation.gov.uk\/uksi\/2021\/783\/made\">Statutory Instrument<\/a> made at 5:40pm and coming into force at 6:00pm on that day! Two policy notices embody her decision:<\/p>\n<p>1) <a href=\"https:\/\/assets.publishing.service.gov.uk\/government\/uploads\/system\/uploads\/attachment_data\/file\/998201\/trn202101-trq-steel-goods.pdf\">The first<\/a>, ostensibly in accordance with TRA regulations, extends the 11 TRQs in the terms proposed by the TRA;<\/p>\n<p>2)<a href=\"https:\/\/www.trade-remedies.service.gov.uk\/public\/case\/TF0006\/submission\/2a5ac09d-a3ce-4706-b114-340239a20854\/\"> The second<\/a>, requiring bespoke legislation, extended TRQs for one year on 5 product categories: for 3 the TRA had recorded no overall increase in imports over 2013-17; for 1 it had identified temporary increases in 2015 and 2016 but a return to normal in 2017, and for 1 it found no useable evidence on UK production and so an injury determination could not be made.<\/p>\n<p><span style=\"font-size: inherit;font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen-Sans, Ubuntu, Cantarell, 'Helvetica Neue', sans-serif\">The third element of the decision was to accept the TRA\u2018s recommendation to let the TRQs on 7 categories expire on 1<\/span><sup style=\"font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen-Sans, Ubuntu, Cantarell, 'Helvetica Neue', sans-serif\">st<\/sup><span style=\"font-size: inherit;font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen-Sans, Ubuntu, Cantarell, 'Helvetica Neue', sans-serif\"> July 2021. The evolution of the TRQs from the EU investigation to the current outcome is sketched in Table 1.<\/span><\/p>\n<p>The Secretary of State\u2019s \u2018pick and mix\u2019 approach is contrary to the TRA Regulation\u2019s Article 52(1), which requires that \u2018Where the TRA makes a recommendation \u2026., the Secretary of State must accept or reject that recommendation\u2019 and the fact that the TRA made just one recommendation.<a href=\"#_ftn4\" name=\"_ftnref4\">[4]<\/a> The \u2018all or nothing\u2019 requirement is designed to try to oblige the Government to recognise the need for balance and to decide matters on principle rather than on the political expediency of favouring some interests over others.<\/p>\n<h3>Does it matter?<\/h3>\n<p>Temporary TRQs on imports of five categories of steel are not a huge issue <em>per se<\/em>. But the issue is important for what it says about the UK Government\u2019s attitude to rules and trade. The Government preferred <em>ad hoc<\/em> political decision-making to anything resembling an objective decision based on legislated procedures:<\/p>\n<ul>\n<li>It over-ruled the first major decision of its own watchdog on Trade Remedies;<\/li>\n<li>It took less than a month to violate its own rules of procedure;<\/li>\n<li>It has not yet explained its decisions to Parliament, and<\/li>\n<li>The decisions in the second notice are clearly contrary to the WTO Agreement on Safeguards because there was no increase in UK imports and\/or injury.<\/li>\n<\/ul>\n<p>The structures for administrative protection such as safeguards and antidumping actions are far from perfect. They are bureaucratic, costly and disadvantage small firms and consumers. Large firms and those that would gain a great deal from protection can afford the resources to operate the system in their favour by collecting and presenting evidence and employing very smart lawyers. Small firms lack resources and individual consumers lack the incentive to oppose any particular tariff because it has only a small effect on their budgets. But policies add up over sectors and there are millions of consumers, so in the end they are greatly under-represented in decisions to introduce trade restrictions relative to the aggregate harm they suffer from reducing imports.<\/p>\n<p>My good friend and colleague the late Mike Finger <a href=\"https:\/\/www.jstor.org\/stable\/1831544\">was a fierce critic of administered protection<\/a>, but he eventually concluded that it does have <a href=\"https:\/\/doi.org\/10.1017\/S147474561500018X\">one virtue<\/a>. Analysing policy-making in Peru and Argentina, he concluded that, by codifying and making open the process of making one-off protection decisions, these procedures help to avoid political ad hocery and its eventual descent into favouritism, clientelism and chaos. The TRA was a step in the right direction, and in one swoop, Ms Truss has jumped straight back into the fire.<\/p>\n<h3>Table 1 Steel product categories and decisions concerning Tariff-Rate Quotas<\/h3>\n<p><img loading=\"lazy\" class=\"alignnone size-full wp-image-6067\" src=\"http:\/\/blogs.sussex.ac.uk\/uktpo\/files\/2021\/07\/Screenshot-2021-07-08-at-09.27.56.png\" alt=\"\" width=\"820\" height=\"672\" srcset=\"https:\/\/blogs.sussex.ac.uk\/uktpo\/files\/2021\/07\/Screenshot-2021-07-08-at-09.27.56.png 820w, https:\/\/blogs.sussex.ac.uk\/uktpo\/files\/2021\/07\/Screenshot-2021-07-08-at-09.27.56-300x246.png 300w, https:\/\/blogs.sussex.ac.uk\/uktpo\/files\/2021\/07\/Screenshot-2021-07-08-at-09.27.56-768x629.png 768w\" sizes=\"(max-width: 820px) 100vw, 820px\" \/><strong>Notes:<\/strong><br \/>\n<em>Column explanations:<\/em><br \/>\n[1] product group numbers from EU 2019<br \/>\n[2] category description<br \/>\n[3] UK imports, 2019, \u00a3 million<br \/>\n[4] UK imports, weight, thousand metric tonnes<br \/>\n[5] outcome of EU investigation REGULATION (EU) 2019\/159<br \/>\n[6] UK Secretary of State\u2019s Transition decisions, 2020<br \/>\n[7] TRID\u2019s Statement of Intended Preliminary Decision, 19<sup>th<\/sup> May 2021<br \/>\n[8] TRA\u2019s Recommendation to the Secretary of State (TF0006), 11 June 2021<br \/>\n[9] Secretary of State\u2019s TRADE REMEDIES Notices No.s 1 and 2, 30 June 2021<\/p>\n<p>Explanation of entries:<\/p>\n<p>1 (shaded green) TRQ recommended\/implemented; 1a TRQ recommended but on a slightly reduced set of product codes within the category; 1y TRQ implemented for one year<br \/>\n0 (shaded red) TRQ investigated but not recommended\/implemented<br \/>\n.. (shaded white) TRQ not investigated because ruled out at an earlier stage<\/p>\n<h3>\n<a href=\"#_ftnref1\" name=\"_ftn1\"><\/a>Footnotes<\/h3>\n<p><a href=\"#_ftnref1\" name=\"_ftn1\">[1]<\/a> With its independent trade policy, these decisions had to be based on UK data alone.<br \/>\n<a href=\"#_ftnref2\" name=\"_ftn2\">[2]<\/a> The EU investigated imports into the EU. It was necessary to go back to the original period because the question was to <em>extend<\/em> the measures, not to introduce new ones.<br \/>\n<a href=\"#_ftnref3\" name=\"_ftn3\">[3]<\/a> Relative to the EU exercise, the TRA disaggregated categories 4,19, 25 and 28 \u2013 see below for definitions.<br \/>\n<a href=\"#_ftnref4\" name=\"_ftn4\">[4]<\/a> The fact that emergency bespoke legislation was required seems to confirm this. The <a href=\"https:\/\/trade.ec.europa.eu\/doclib\/docs\/2013\/april\/tradoc_151013.pdf\">EU<\/a> makes overturning advice on trade remedies more demanding politically than merely introducing <em>ad hoc<\/em> legislation in a hurry.<\/p>\n<p><em>Disclaimer:<\/em><br \/>\n<em>The opinions expressed in this blog are those of the author alone and do not necessarily represent the opinions of the University of Sussex or UK Trade Policy Observatory.<br \/>\n<\/em><\/p>\n<p><em>Republishing guidelines:<\/em><br \/>\n<em>The UK Trade Policy Observatory\u00a0believes in the free flow of information and encourages readers to cite our materials, providing due acknowledgement.\u00a0For online use, this should be a link to the original resource on our website. We do not publish under a Creative Commons\u00a0license. This means you CANNOT republish our articles online or in print for free.<\/em><\/p>\n<div class=\"dmbs-comments\"><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Share this article: 8 July 2021 L. Alan Winters is Professor of Economics and Founding Director of the UKTPO.\u00a0Guillermo Larbalestier is Research Assistant in International Trade at the University of Sussex and Fellow of the UKTPO. On 1st June 2021, as part of its post-Brexit trade architecture, the UK Government launched the Trade Remedies Authority (TRA). On 11th June the TRA recommended the extension of only some of the quotas and tariffs on steel imports that the UK had inherited from the EU. On 30th June, one day before these measures were due to expire, the Government rejected the TRA\u2019s recommendation and extended the policies on several categories of steel for which the TRA had recommended the revocation. It also announced a review to check whether the TRA was \u2018fit for purpose\u2019. What was going on? And does it matter?<\/p>\n","protected":false},"author":213,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[129970,130195],"tags":[148016,148017,148019,147852,148018],"_links":{"self":[{"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/posts\/6065"}],"collection":[{"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/users\/213"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/comments?post=6065"}],"version-history":[{"count":8,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/posts\/6065\/revisions"}],"predecessor-version":[{"id":6074,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/posts\/6065\/revisions\/6074"}],"wp:attachment":[{"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/media?parent=6065"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/categories?post=6065"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.sussex.ac.uk\/uktpo\/wp-json\/wp\/v2\/tags?post=6065"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}