Examination of Witnesses (Questions 20
- 32)
MONDAY 6 NOVEMBER 2000
MR MICHAEL
LEAHY, MR
MICHAEL WALSH,
MR BOB
SHANNON AND
MR PAUL
COLLIER
Mr Cunningham
20. Do you think enough is being done to either
prevent or stop dumping of steel in this country?
(Mr Leahy) No, I do not. There is a difference in
terms of the process that we have in Europe and in North America,
for instance. The lead time to actually notify dumping and the
procedures that have to be followed are too elongated and quite
clearly put us at an extreme disadvantage in the UK in particular
but in the rest of Europe as well.
(Mr Shannon) If you compare ourselves with America
in terms of their anti-dumping legislation, within a month of
making a complaint you can almost block any material coming into
the country. Both Michael and I are members of the ECSC, European
Steel and Coal, and we know—this is where we support Corus
from this end—if you lodge an anti-dumping suit it can take
six months even to begin it. By the time those six months are
over you have lost your market and the damage is done essentially.
If you look at the American situation they are very, very good
at protecting their home markets in that way.
21. Have any representations ever been made
to the Government about this?
(Mr Shannon) Yes.
(Mr Leahy) Yes.
(Mr Shannon) We have done it jointly, the ECSC have
done it. We are at one there with the producers in that sense
in trying to speed the bureaucratic process internally.
22. How has Government responded?
(Mr Leahy) I think it is still an open question. The
Steel Association, which will be giving evidence, has made some
fairly forceful representations and I am sure they could give
you their representations chapter and verse.
23. What do you think of the European Commission's
decision to request talks with the US regarding the 16 cases of
the imposition of countervailing duties on European steel exports
alleged to have benefited from government subsidies? What is your
view about that?
(Mr Walsh) It is a matter of extreme concern. The
latest development has been that new legislation, initially about
farming, has been introduced in the United States which will require
that levies collected as a result of anti-dumping cases are paid
directly to the steel companies in the United States. This really
invites a challenge at the World Trade Organisation and I sincerely
hope that our Government will pursue it with the utmost speed.
24. As we understand it, the USA is going to
repay the countervailing duties imposed on British Steel, in other
words they are going to pay back something. What do you feel about
that?
(Mr Walsh) The damage is done, the markets are lost
for a time. There were 12 anti-dumping cases last year in cold
rolled products against 12 different countries and the exports
of those countries to the United States of steel products was
halved last year and there is a continuing decline this year.
Even though the cases were lost by the United States it had a
very dramatic impact on the exports of steel from those countries
to the United States.
25. Whether there is a rebate or not British
companies lose out because of the time factor?
(Mr Walsh) That is right, yes.
(Mr Shannon) It is a bit like the street trader who
pays their fine. You work out the profit and loss and if you are
earning £100 but losing £20 in fines then you are in
£80 and it is a straight forward profit and loss situation.
I think they look at the rebate and by the time it is paid and
it is real money, effectively what you have gained is the long-term
market.
Chairman: We would be obliged if you could provide
us with some more information on that, Mr Walsh.
Mr Cunningham
26. Moving on to European enlargement, do you
think that enough is being done by the DTI to ensure that Polish
steel is restructured?
(Mr Leahy) As you know, Corus is considering a considerable
investment in Poland. We understand from the information we have
that it intends purchasing a mill, or mills, that would produce
long products in Poland. There is speculation about how much it
will cost them. Some estimates go as much as £70 million.
Although we were told it would only be small tens of millions
of pounds, they are talking about £70 million. As I understand
it, at Huta Katowice they will continue to produce steel plant
and Danieli are interested in purchasing that. There will be an
agreement, if there is a final agreement, for supplying steel
and they will use the semi-finished products into the market.
Corus tell us that will not have an impact on UK production. However,
we are fearful of the fact that their philosophy is to get closer
to the market of Europe which at the moment is quite significant,
as I said 50 per cent is exported, 75 per cent in Europe. There
is a gradual undermining of UK production. We believe it is strategically
important for the Government to say it is in the economic interests
of this country, and industrially manufacturing steel is at its
core, to ensure that we maintain a reasonable level of production
in the UK because if we do not then the steel industry is going
to wither on the vine.
(Mr Shannon) I think this goes back to the argument
that has been used before of the level playing field. The labour
costs in Poland are about one-third of those in the UK, plus there
are sufficiently less social charges as well. Certainly my own
union supports the enlargement of the market because I think it
is absolutely essential for the future, but that has to be done
on the basis of working towards a level playing field. If you
simply bring in those large Polish steel workers currently with
those labour costs, it is not just going to be the UK that would
find it very difficult to compete, it is the rest of Europe as
well. Where we would support the enlargement and use those arguments,
it has to be done on the basis of working towards a level playing
field so the UK steel workers can compete fairly.
27. Has this cheaper Polish steel had a major
effect in Europe?
(Mr Shannon) I think that in Poland it certainly has
but at the moment, because they are not members of the European
Community, there are some disadvantages to how they actually position
themselves. In some of their plants there are major environmental
problems. Of course, there is the larger political argument that
wants Poland in and we, while supporting that, do not want to
see the UK industry be a casualty of that larger argument.
(Mr Leahy) Corus would say that GDP has grown at six
per cent in Poland, that most of the steel that is going to be
produced would be for domestic consumption and, of course, they
can attack markets particularly in Germany where German steel
companies have attacked our markets. We believe in the long-term
strategically they are taking a decision to actually invest in
Europe at the expense of the UK and if we are not careful we will
see this strategic industry wither on the vine.
28. Going back to the workforce, do you think
there is enough being done in the steel industry regarding training?
(Mr Leahy) No. I notice the statistics that are quoted
in terms of £65 million being spent on training. The problem
here is what sort of training. A lot of that money is being spent
on graduate education, it is not being spent on training the people
that Bob and I represent. Specifically the training is on-the-job
training. We believe that Corus and other steel manufacturers
have a responsibility to give our members transferable skills.
We have lost a large number of jobs over the last 20 years. We
had in place the ISERBS benefit which cushioned retraining into
other industries. The Conservative Government withdrew that unilaterally
and there is no training available other than the SPT that ISTC
introduced, the Steel Partnership Training, which has cost us
about half a billion pounds over the last four years. We are training
our members in skills that they can transfer into industries in
the community. We believe that Corus in particular is abrogating
its responsibility on that particular front. In short, we are
very concerned about that particular issue.
(Mr Shannon) I am sure everyone is aware that most
of the steel industry is still concentrated in local communities
that are overly dependent on that. It is not easy to transfer
these skills. I have come today from the DTI where the AEEU is
now launching a programme for real jobs within the industry, if
it comes to that. We have to accept there will be some job losses
out of the industry. It has a different effect. Because where
it is localised in steel plants, it is not just the steel plant
and the steel workers it affects, it runs on right into the local
community in terms of the supporting businesses, so it has a larger
impact than normal because of the large nature and numbers surrounding
an integrated plant. We are hoping, and this is the first indication
we have had, that Corus are now prepared to enter into a partnership
and hopefully they will fulfil that with ourselves as a union
and the DTI to actually produce and look at jobs in the new economy.
29. Would you say that this has had an impact
in relation to skills shortages in the industry, the lack of investment?
(Mr Leahy) In terms of skills shortages, most of the
production workers and, may I say, Bob's members as well come
in from school and they are educated in the industry. For a long
time we have said to the industry that they should be giving people
not only education, because most of them who are now going to
be declared potentially redundant are in their 50s, they left
school at 15 and the only education they have had is in the industry,
they should be educating these individuals far better and also
they should be giving them transferable skills. I have to say
that we have tried to persuade them to do that and up until now
they have not faced up to their social responsibility. Whilst
it is quite easy to declare people redundant I think they should
be taking on board their social responsibilities in those steel
communities where you already have high unemployment.
30. What about apprentices? Are there any apprentices
in the industry?
(Mr Shannon) Yes, they are still taking on apprentices
but that is dropping off. One of the real problems is either as
an apprentice or as a graduate production worker you come into
an industry that is perceived to be repositioning itself and if
you are looking for a future in it, that itself starts to cut
short your intake because individuals look at that and say "I
am not likely to be working for this company in two years".
If this plant is in the process of running down, if this industry
is running down, then you have this self-fulfilling prophecy that
keeps reinforcing itself. We are finding that effect, that apprentices
are looking at the industry when they come to make a decision
and saying that whereas before it would have been automatic or
they would have considered that to be one of the prime industries
they would go into, they are now having second thoughts. That
reinforces the difficulties that companies have in attracting
a skilled workforce.
31. Earlier on somebody touched on the business
about people being over 50. What is the actual age profile in
the industry, roughly?
(Mr Leahy) I have not got the exact statistics but
I do not think it is any coincidence that 4,400 people have been
earmarked for redundancy and that is about the level of people
over 50.
Chairman
32. Just to come back on one point about imports.
In the AEEU submission reference is made to the penetration of
UK steel markets by imports. We have been visiting a number of
car plants and talking to people about where their steel is sourced
and things like that. Is this import penetration attributable
only to price or are there other factors involved? We are talking
here about international companies assembling cars in the UK who
have different views on chains of supply. They do not necessarily
require a Union Jack to be wrapped around everything. What is
the position? Is it price? Is it the inclination of the companies?
Are there problems?
(Mr Shannon) In the first instance it would be price,
they would look at that first of all. You then look to see the
security of the supply. If you are looking, especially in terms
of just-in-time, we have seen the effects recently in the fuel
prices where you have had lots of just-in-time agreements and
they are very, very vulnerable to short-term stoppages or interruptions
in the supply chain. If you are looking as a customer, whether
in the car industry or the construction industry, the first thing
you look for is security of supply in terms of supplying your
own customers. If that is brought into doubt you then start to
doubt, if you like, the integrity of whether that is going to
be supplied and you look to source elsewhere. We are seeing some
evidence of that beginning to happen, some of the major companies
are saying "if we are not going to have security of supply
and an integrated plant within a reasonable distance of where
we produce then we have got to look to see how we source it elsewhere".
That is the point we are making, that the company's intention,
whether it understands it or not, is having an adverse effect
on its competitiveness.
(Mr Leahy) We are not on a level playing field. We
would support the Steel Association when they say that electricity
prices are 40 per cent higher here than in Europe and 20 per cent
of total costs are electricity prices. The fact is employment
costs were 18 per cent and will probably drop to 16 per cent.
So employment costs 16 per cent and overall energy costs 20 per
cent. That gives you some idea of what is going on.
Chairman: Thank you very much, gentlemen, I
think that is very helpful. As I say, there are one or two points
we would like you to supplement with written evidence and we would
be very grateful to you for that. I do not think you should take
umbrage at the fact that just as you finish two of my colleagues
arrive. In my former capacity as a school teacher I think I could
probably guarantee that I would get letters from their mothers
explaining graphically why they did not arrive on time but I think
you appreciate the vicissitudes of the weather. Thank you very
much for coming and for the evidence you have given.
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