To renationalise or not to renationalise?
The call to renationalise the Steel Industry as a means of preventing its closure is an understandable response, both in terms of the strategic and socio-economic impact of its closure. The question is, however, would renationalisation alleviate its problems and enable the industry having to compete against subsidised steel from other countries?
Global markets are, unfortunately, not an even playing field, so in this respect renationalisation of the UK Steel Industry would need to be seen as a form of subsidy as a means of offsetting subsidised steel from China. Renationalisation, if enacted, should be seen as a short-term solution, especially as the call, quite rightly, is for a clear long-term strategy for the industry. Viewing nationalisation in this way, one which sees it as short-term in orientation, does, of course, have precedence, namely, “bailing out” the banking sector in 2008 (78.3% state ownership of RBS and 41% state ownership of Lloyds at that point, which was used as a means of support with the view to, when financially sound to do so, returning to full private ownership; we are now eight years on and state ownership of RBS, for example, is now 73%! It is interesting to note that the discussions on renationalisation/nationalisation have revolved around its form, and the political consensus seems to be one that does not see it as a long-term solution. A recognition, perhaps, that the form nationalisation took in the past was of its time and would not fit the way the UK economy is currently configured.
As to using tariffs on imported steel, does not such a move risk creating a “trade war” which would not serve the long-term survival of steel production in the UK. The Chinese have already signalled a rise in tariffs on imported specialist high-tech steel from the EU, Japan and South Korea; and the U.S. already applies tariffs of 266% on imported Chinese steel. The start, perhaps, of a slippery slope toward further tariffs being imposed, which may not serve UK interests in the long run. The power of tariffs to offset any comparative advantage held by other nations depends on the economic strength of the country applying tariffs, that is, comparative economic strength in relation to levels of imports and exports.