What the Tata Steel crisis tells us about Brexit

From time to time a laser beam pierces the prevailing fog. This week has provided a clear example. Tata’s decision to pull out of steel-making in Britain—meaning 15,000 people will lose their jobs—allows us, for once, to say with some certainty what would have happened had the United Kingdom been outside the European Union.

Let’s start with the main facts. Tata’s British steel-making operation has been losing £1m a day. One major reason is that China has been dumping steel at below-cost prices, in order to keep its own steel industry going. The EU could have prevented this by raising tariffs against Chinese steel, as the world’s evolving free trade arrangements allow anti-dumping measures.

In 2013 the European Commission proposed precisely this. It wanted to lift the “lesser duty” rule that had allowed China to sell steel to Europe with ease. However, in 2014, the EU’s Council of ministers were unable to implement this proposal. Most countries backed the plan but Britain opposed it. Britain was not quite alone, but it was the ringleader in wanting China to continue to sell steel without impediment. The result: Chinese sales to Europe have been soaring, and steel plants such as Port Talbot have become hopelessly uncompetitive.

Now let’s replay that on the basis that the UK had not been a member of the EU. The “lesser duty” rule would have been lifted. Companies importing steel from China would have had to pay a tariff. European steel-making plants would have been more able to survive and prosper.

As for Britain, given the government’s opposition to anti-dumping measures, we would have had a choice.

1: The “sovereignty” option. Britain would have used its freedom to refuse to apply a tariff to Chinese steel imports. Given a) China’s wish to continue making and selling as much steel as possible, and b) the greater difficulty China would have had in selling to the EU, the chances are that even more steel would arrive in Britain at even lower prices. In order to prevent cheap Chinese steel entering the EU by the back door, Brussels would have imposed crushing tariffs on British steel being sold to the continent. British steel making would have gone out of business even faster.

2: The “fax democracy” option. To avoid the grim outcome of option one, Britain would have copied the EU’s decision and imposed tariffs on steel imports from China. British steel-making would have had a better chance of survival. We could have continued to trade with the EU. But we would have achieved this by going against the Government’s preferred trade policy, and by imposing rules that we would have had no part in making.

There you have it. As far as Britain’s steel industry is concerned, Brexit would have offered a clear choice: genuine sovereignty and economic disaster; or political impotence and the chance of greater prosperity.