If there is anything amusing about a looming trade war, it’s the faux indignation expressed by politicians and policy-makers over how free trade should somehow be sacrosanct. The proposition certainly isn’t supported by the available evidence, quite the opposite in fact. When the World Trade Organization (WTO) was set up in 1995 as a replacement for the General Agreement on Tariffs and Trade (GATT), it had to contend with individual countries’ commitments on specific categories of goods and services that ran to 22,500 pages – the global economy is stitched together by protectionist constructs.
Indeed, one of the chief constructs – The European Union (EU) – has just opened a case at the WTO after the US imposed duties on imports of European steel (25 per cent) and aluminium (10 per cent). It’s worth noting that as the EU was seeking redress from the global trade body, it had in place 27 measures on steel and iron imports from China following an investigation by the European Commission into suspected dumping practices.
The US move on steel tariffs also applied to Canada and Mexico – its partners in the North American Free Trade Agreement (Nafta), an extra complication given the three nations were expected to have reached a deal, at least in principle, on the renegotiation of the trade agreement. On the campaign trail Donald Trump promised to either revamp the existing arrangements (“the worst trade deal in history”) or dismantle it altogether. The stakes are high given that the US was the world’s largest steel importer in 2017, with its northern and southern neighbours holding down the first and fourth respective places among the importers.
The good news is that under WTO rules, the EU will need to stall any retaliatory counter-measures until it can prove US tariffs are having an impact on the European market. This gives all parties a bit of breathing space, providing delegates at this week’s G7 summit in Quebec with a chance to engage in the usual horse trading. So, hopefully common sense will prevail, and the worst we’ll see are some symbolic tit-for-tat measures ahead of a compromise, rather than a full-blown trade war – but you never know. After all, substantive measures linked to Donald Trump’s ‘America First’ strategy are likely to play well with the president’s core constituency ahead of the US mid-terms in November.
There was certainly consternation on these shores with the GMB, the steel workers union, warning that the tariffs threaten 34,000 UK steel jobs. It’s not just that the US accounted for 7 per cent of UK steel exports in 2017, the domestic steel industry may also have to contend with an influx of excess production from major steel-producing nations; a scenario not dissimilar to the one that precipitated the industry crisis of 2015, when cheap Chinese exports flooded world markets.
