A steady rise of market distortions can be observed in global trade with increasing impacts on costs, prices, and market behaviours, especially in recent years. This trend has been reinforced by the Covid-19 pandemic when many governments have supported domestic industry with various measures. Accordingly, governments have prioritised the need for a better understanding of situations in which such distortions take place in the markets of key trading partners, and how the mechanisms of these distortions work on the ground.
It is of vital importance to better understand how government-induced market interventions affect prices and competition in domestic industries, and what the reasons are for market distortions to occur. Market distortions can be caused by different factors, including intervention by governments, market structure, or behaviour by companies operating in national and foreign markets. Government measures imposed in response to international crises, such as the ongoing war in Ukraine, the Covid-19 pandemic, or the Global Financial Crisis in 2008, can also be at the root of market distortions.
The UK Trade Remedies Authority (TRA) commissioned independent research from LSE Consulting to inform analytical approaches to assess the existence and scale of government-induced market distortions in steel industries in major steel producing countries. This research provides a first step towards building an improved understanding of some of the relevant issues at a high level. It does not, however, constitute a comprehensive or exhaustive source of information on all relevant market distortions that can be directly applied in trade remedy investigations. Although some of the potential market distortions identified in this research could be considered in trade remedies investigations on a case-by-case basis, the outputs of this research would likely need to be supplemented with further evidence at a more granular level to enable assessments of Particular Market Situations in specific markets for narrowly defined products.
This report focuses on the impact of activities of public bodies and State-Owned Enterprises (SOEs) which can distort the markets in which they operate. These interventions are of key relevance in understanding steel markets developments, including the markets of intermediary products used in the steelmaking industry.