It looks like Britain is about to resort to protectionism. Prime Minister Boris Johnson has proposed raising or extending tariffs on imported steel from a variety of countries including China, Turkey and India.
While the reasoning behind this plan may look sound, it sets a bad precedent for a government run by the Conservative Party, usually a champion of free trade.
The logic of the anti-free trade move revolves, like so many other things right now, around the soaring costs of energy especially for electricity.
Right now it doesn’t matter what your source of energy is in Europe (including the UK) the sanctions on Russia have made them all vastly more expensive.
Meanwhile, other so-called developing countries still have access to oodles of cheaper coal and so they can make their steel and still make a profit even when prices for the metal are modest. Prices for steel reinforcing bar, a key construction materials, have fallen around 14% since early May even while energy costs have soared.
That drop in price doesn’t help high cost producers like those based in Britain, so it’s relatively easy to see the UK government’s reasoning behind the planned move.
However, what isn’t so clear or so logical is the huge precedent that such a move will set. If free-market and free-trade Conservatives are set to introduce trade restrictions (that is what tariffs are, after all) then why should anyone else by a free-trader?
That’s a hard thing to answer, and in the future Britain may find itself on the other end of tariffs when it is in need of free trade deals with other countries.