Could a row over steel blow up the Tory party?

When Boris Johnson was campaigning for Brexit, he placed much importance on World Trade Organisation rules. The WTO, he’d argue, had an internationally-recognised free trade rule book - which was ready and waiting to be used as a substitute to the European Union system. This is why he could face some very difficult questions next week if he decides to extend tariffs on steel imports in a way that some think flout WTO rules.

Last year the PM ignored advice from the independent Trade Remedies Authority – a trade watchdog which his government created post-Brexit – which wanted him to ditch some of the tariffs currently in place that, they said, weren’t making a meaningful difference anyway. But Johnson extended most of the tariffs, which expire at the end of this month. They’re now expected to be renewed by the government, with the PM writing to seven cabinet ministers last week to alert them of his plans.

Anne Marie Trevelyan is in favour of the PM’s proposed extension - so the Trade Secretary is ready to defy the TRA’s advice. According to the Sunday Telegraph, the government may go further than the extensions and introduce ‘safeguard import limits’ on developing countries to further reduce steel imports. When asked if this breaks WTO rules, a Number 10 source told the newspaper that: ‘we will act in the national interest’ - the language normally used when a party is about to do something that goes against its stated principles.

Could this argument about steel subsidy lead to resignations? Perhaps it already has. These steel extensions are thought to be the straw that broke Lord Geidt’s back, leading him to resign as Johnson’s ethics advisor earlier this month. Number 10 is thought to have asked Geidt for his opinion on whether deliberately breaching WTO rules would breach the Ministerial Code. In his letter to Lord Geidt, the PM said he asked for ‘advice on the national interest in protecting a crucial industry.’ He didn’t say which one, but was assumed to be steel. An industry, he said, that is ‘protected in other European countries and would suffer material harm if we do not continue to apply such tariffs.’

In a written clarification afterwards, Geidt said ‘it is widely still held that a breach of international law would, in turn, represent a prima facie breach of the ministerial code.’ He made clear his resignation was about more than just steel subsidies - but he did confirm that he thinks deliberately breaking WTO is a violation of that code (normally a resigning offence).

Steer tariffs will also stir controversy within the Tory party, especially for MPs who voted for Brexit to spur on more free trade - and lower prices with cheaper imports - yet have so far seen the UK’s exit from the European Union used to usher in more protectionist measures, pushing the cost-of-living higher. The post-Brexit world order is being characterised by state aid and industry handouts, rather than enhanced liberal thinking.

The big change in government thinking is linked to the red wall, whose voters gave Johnson that 80-seat majority in December 2019. Number 10 is convinced that more protectionist measures like tariffs will keep these voters sweet. One government advisor familiar with the Prime Minister’s thinking on tariffs tells me ‘all that matters now is keeping the Red Wall. If we want to do that without promising lots more money, policies like tariffs is how we secure it.’

Rumours are also circulating that the PM offered steel tariffs to certain MPs in the hours leading up to the no confidence vote earlier this month to ensure his survival. This angers other MPs who see a dodgy deal - and fear a defiance of WTO rules will damage trust at a time when Britain needs to be signing trade deals. ‘We’ll be taken to WTO arbitration and we’ll lose,’ says one MP. ‘But meanwhile we’ll damage our own reputation as an honourable trading partner.’

The decision to double-down on protectionism for political purposes adds to the picture of a Conservative party fundamentally transforming its economic agenda to reflect a more populist ideology. These tariff extensions follow in a long line of big spending promises and tax hikes, including a windfall tax on energy companies, which goes further than even the Labour party was calling for. All this makes the Tory economic agenda increasingly indistinguishable from Labour’s agenda.

It’s all a gamble, and the stakes are rising. Will Red Wall voters lean Tory because Number 10 ushered in steel tariffs to protect local industry - or will they revert back to Labour, struggling to see how the Tories did anything different?