Morocco’s industrial policy is unquestionably one of the most important issues currently facing the public authorities given its impact in economic, financial and social terms.
Reflecting on its future, the various threats undermining it, the serious shortcomings plaguing it and its very future itself in light of a series of recent events, is therefore a priority which needs to be rapidly resolved if it is to be given the best possible chance of success.
Indeed, faced with the hollowing out of our country’s industrial landscape over the last decade which has result in the loss of tens of thousands of jobs, we urgently need to consider a number of key factors if we are to provide a pragmatic response to the challenge of unemployment, especially among youngsters.
Donald Trump, a champion of protectionism
First, there is an evident need to strongly promote and orient investment towards industrial projects that provide jobs and ensure a degree of self-sustainability in meeting the country’s needs with a view to reducing the country’s trade deficit.
But there is also a need to preserve at all costs what already exists, that is to say, the existing industrial units that are struggling hard to survive and thrive in an international environment that has become deeply hostile.
This is characterised, in particular, by highly-developed dumping practices as well as the policy of safeguarding national interests by major industrial powerhouses which, to a certain extent, have revived interest in a form of protectionism, despite the WTO’s directives and recommendations.
A number of industries are now impacted, even threatened, by these latest developments, particularly the steel industry, which is the subject of a fierce war waged by major producers as well as by a number of States and their leaders.
One of the most telling examples is unquestionably that of the United States as typified by President Trump’s actions aimed at blocking entry into his country of steel produced in China, Russia, Turkey, Ukraine, Latin America or anywhere else.
These producers, which have been denied access to the US market, are shifting their attention to other regions and countries and are increasingly resorting to dumping measures, targeting those that are perceived as being the weakest.
These countries, like their ‘large’ counterparts, therefore need to preserve their existing units and ensure that local production is, to a certain extent, protected as provide for by the WTO policy’s general safeguard and anti-dumping provisions.
It is well known that the steel market is a global industry but the growth dynamics in terms of global demand and the pace at which new capacity is being installed make it highly cyclical. Since the beginning of the decade, however, the sector has experienced significant overcapacity and many analysts do not envisage a return to equilibrium before 2025.
Given that the steel industry is considered strategic for industrialised countries, the latter began to adopt, as early as 2012, an arsenal of trade defence measures, making it by far the most protected sector in the world.
And low-cost producers, engaging in dumping practices, have seen the major markets in America and Europe shut their doors to their exports. In addition, major industrialised countries have exerted strong pressure on China, obliging it, since 2015, to embark on a closure programme for many steel mills.
And while steel, together with aluminium, was the first product to incur additional duties imposed by the Trump administration, the European Union has acted similarly by imposing provisional safeguard measures on a wide range of steel products. And in both cases, the additional 25% duty came on top of the previous protectionist measures.
Such is the international backdrop against which Morocco’s public policy needs to be analysed, a policy which aims to protect domestic steel production in all its forms.
Morocco’s open-door policy
Given what is happening internationally, it is abundantly clear that Morocco currently has one of the most ‘liberal’ (lax?) policies when it comes to protecting its domestic production as well as being one of the least protected countries within the region among those with steel production capacity.
In fact, for hot-rolled steel for example, only European and Turkish steel incurs an anti-dumping duty of 11%. Imports from other countries which have a free trade agreement with Morocco are exempt all duties. As a result, US exports to Morocco are exempt while Moroccan exports to the US incur duties of 25%. Imports from other countries incur a 10% charge under the Common Customs Tariff system.
As a result, a suitably low-cost Ukrainian exporter will see its cargo taxed at the rate of 10% in Morocco versus 25% in the US, 77% in Canada, 25% + 15% in Mexico, EUR 60 + 25% in Europe and 20% in Iran.
Its Russian ‘counterpart’, equally low-cost, will see its cargo taxed at the following rates, depending on the destination:
Morocco: 10%
US: 25% + 74-185%
Mexico: 21% + 15%
Europe: EUR 96 + 25%
Thailand: 128%
Iran: 20%
South Africa: 20%
India: 10% + minimum price incurred
For a Chinese exporter of cold-rolled steel, the following rates apply:
Morocco: 16%
US: 25% + 266% + 256%
Canada: 92% + 12%
Mexico: 15% + 66% + 103%
Europe: 25% + 20%
It must be understood, however, that, given these rates and international market prices, there is no gain to be had from Morocco protecting an obsolete steel sector with production units below international industry standards.
Indeed, the steel industry is a heavy industry requiring a high level of mastery when it comes to production processes. As a result, to achieve the best possible results, the industry needs to invest in people, leverage its know-how and adopt rigorous production systems.
Today, Morocco can take pride in having industrial flagships that have progressed rapidly along the learning curve while improving performance in line with international standards. For example, at one of Maghreb Steel’s sites, processing costs fell by 20-40% at constant prices between 2014 and 2018 for its various lines.
Furthermore, at Sonasid’s and Maghreb Steel’s steel mills, consumption ratios for the main consumables are lower than the international average.
We’re not suggesting protecting an underperforming industry or adopting a rent-seeking approach but, rather, preserving the Kingdom’s national interests, its industrial fabric and the jobs that it generates.
Mention could be made, for example, of Maghreb Steel, whose past difficulties are well-documented. For more than three years, the steel-maker has been implementing a business recovery plan which has involved restructuring its production facilities with the government’s support. It has also enjoyed a moratorium on its high levels of debt from a number of local banks.
As part of this rescue operation, Maghreb Steel has recruited more than 400 executives and engineers. Their jobs and those of other Group employees would be under threat if the public authorities, which have until now turned a deaf ear to pressure from local lobbies, were to endorse the pro-dumping measures of importers partnering low-cost producers from Central Europe or Russia.
It must also be clearly recognised that, despite its industrial performance, the domestic steel industry remains fragile and is penalised by the country’s limited domestic market.
In this industry, economies of scale are needed to ensure a return on assets. Similar safeguard measures to those adopted by other industrialised countries within the region regarding processed products would allow producers to focus their efforts on their main challenge, which is to expand their market and promote steel usage.
Like the other countries that preceded Morocco in adopting a successful development model focusing on national interests, developing the country’s industrial fabric and its steel industry is something which must be done in parallel, with a long-term vision, government support and the disqualification of unfair competition. Because no country has industrialised without having a strong iron and steel industry!
Neither more nor less than the others!
Morocco’s development model must incorporate its industrial sector if it is to escape the ‘middle-income trap’. And, as mentioned above, the stakes are enormous in terms of jobs, value added and the trade balance, not to mention the social impact and the contribution to economic development from having a strong middle class, with a knock-on effect on other productive sectors.
That is why protectionist mechanisms, as permitted by the WTO, must be maintained to give sufficient time to emerging industries to improve their cost structures and their productivity to be able to build a genuine industrial base, as has been done by every developed country in the past.
Contrary to the allegations and posturing by a handful of importers of steel products which have only their own narrow interests in mind and which demand an end to the safeguard measures for steel, the government must continue to provide provisional and temporary protection. This must be the sole criterion which should be legitimately considered when it comes to the domestic steel sector’s sustainability, as the basis for a global and national industrial development model.
The effective protection that Sonasid has enjoyed in its speciality segment, that of long steel, should continue to be implemented for Maghreb Steel’s flat steel segment, so that the nation’s steel production is sheltered from international predators which know only too well how to activate their local networks at the risk of jeopardising the nation’s successful industrial concerns.
Afifa Dassouli
Original article : https://lnt.ma/secours-siderurgie-nationale-menacee-lobbies-dumping/
Pour aller plus loin
