It has always been a case that the steel industry anywhere in the world turns protectionist largely in a self destructive way pursuing short-sighted and narrow objectives whenever faced with a recession or even a temporary drop in prices.
While the dumped or highly subsidised steel caused havoc in the past, especially in the developed world, the global economic order has changed significantly over the past to make it difficult for any nation to significantly subsidise exports or for the steel makers to sell at second best prices merely to extend territories into new areas. What is worrisome is that every time the market collapses, the remedy is sought through extensive and unreasonable protective measures.
In India, this time, it started with stainless steel cold rolled sheets and then added one more for HR coils of mild/carbon steel.
Can we realistically and sensibly relate the woes of the steel makers to cheaper imports? If it had been so, the headache for the government should have significantly reduced. Instead of devising a stimulus package for the industry, offering tax concessions and many other such benefits, it can simply adopt a few more transparent protectionist measures to raise trade barriers and have the problems of the industry sorted out, with all of them coming through at a fairly small cost.
It is naive to believe that the government does not know where the problems lie. When demand has weakened to halve prices of steel, trying to protect domestic producers anxious over anti-dumping investigations, will neither save the industry from long-term woes nor will it go down well in the global steel community.
There will be a price to pay for such an action economy wide. There can be retaliatory actions. The credibility of the Indian economic policy makers will drop making investments fly away to other countries. We already witnessed one announcement involving a European company to go slow on their proposed investments in India. India’s economic stability is already a serious concern among investors despite it being a democratic country with a strong judiciary. Steel using industries will lose out in global competition if they have to buy steel at higher price.
Today, when the industrial production is down, there is no money in the market and employment growth is coming under a crunch, why should the country send a wrong signal to the world by initiating arbitrary and thoughtless actions? If steel industry’s interests are to be protected, there are many different ways which can actually see them through.
If the steel makers are finding it hard to spot buyers at the ruling prices, there are no chances that they will get one at higher prices. It will certainly give no extra pleasure to a steel user to buy from a foreign customer unless there are genuine reasons for doing so.
The WTO provides sufficient safeguards to act against unfair trade practices – whether these are related to dumping or subsidies. The rules of the WTO need to be interpreted correctly and not arbitrarily. Lack of transparency and use of improper discretion lead to loss of credibility and trust, the two pillars in global business. While the industry has the right to fight for its own interest, the government agencies should act cautiously and not in such a haste. The government is merely creating an impression that it is not concerned about the merit of the case, but, is mindlessly driven to protect the domestic industry.