Steel Exposes Hard Limits Of Much-Vaunted Free Trade Piety

By K Raveendran

India’s decision to initiate an anti-dumping investigation into cheap steel imports marks more than another defensive trade action. It is a reminder that globalisation, which New Delhi has often invoked when Indian exports face barriers abroad, becomes far more complicated when the pressure arrives at home. The steel case has exposed the contradiction that sits at the heart of every large economy’s trade policy: open markets are desirable when they expand one’s reach, but politically and economically painful when they threaten strategic domestic capacity.

The investigation into steel imports from China, Japan and Russia comes at a time when Indian producers are facing a sharp squeeze from low-priced shipments, particularly from China. Finished steel from China has entered the Indian market at prices domestic mills say are difficult to match. China has emerged as India’s largest supplier of finished steel, deepening concern in an industry that is capital-intensive, employment-generating and central to infrastructure, construction, automobiles, engineering and defence manufacturing. For India, steel is not a marginal commodity. It is an industrial backbone.

The irony is difficult to miss. India has frequently protested when other countries restrict Indian goods, whether through tariffs, standards, quotas or anti-dumping measures. Its exporters have often argued that such actions are protectionist, unfair or politically motivated. Yet New Delhi is now using the same trade remedy framework to shield domestic producers from imports it says may be entering at unfairly low prices. This does not make India hypocritical in any unusual sense. It makes India a normal state in a world where national interest routinely outranks free-trade theory.

The language of globalisation has always promised mutual benefit. Markets would open, efficiencies would rise, consumers would get cheaper goods and producers would find new buyers. India has gained substantially from that order. Pharmaceuticals, information technology services, automotive components, textiles, chemicals and engineering goods have all benefited from access to foreign markets. Foreign competition has also forced parts of Indian industry to modernise and improve quality. But the steel dispute underlines the other side of the bargain. When foreign producers, backed by scale, state support, cheaper finance or excess capacity, flood a market, the impact is not limited to price. It can reshape the industrial base of the importing country.

Domestic steelmakers operate under burdens that are not always visible in the final price of a tonne of steel. They must invest heavily in plants, mines, logistics, environmental compliance, power, technology and labour. The business requires long investment cycles and carries large debt exposure. Freight costs, land acquisition challenges, raw material linkages, regulatory delays and expensive capital all affect competitiveness. A company cannot shut and restart a blast furnace with the ease of a trading firm switching supply sources. Once capacity is damaged, revival is slow and expensive.

This is why the issue cannot be reduced to the narrow argument that cheaper imports benefit consumers. They do, at least in the immediate term. Builders, fabricators, small manufacturers and downstream users welcome lower input costs. Infrastructure projects may gain from cheaper material. Inflationary pressure may ease. But if low prices are the result of dumping or surplus disposal rather than genuine efficiency, the short-term gain can come at the cost of long-term dependence. A country that allows core industrial sectors to weaken may later discover that the market does not remain cheap when domestic alternatives have vanished.

China’s role is central to the debate because its steel industry is not merely large; it is structurally capable of influencing global prices. When domestic demand weakens in China, excess steel seeks external markets. Countries across regions have then faced similar anxieties: local mills complain of price suppression, governments weigh tariffs, and importers warn against higher costs. India is not alone in confronting this pressure. The wider world has moved towards a more guarded trade posture, particularly in industries linked to strategic capacity, jobs and infrastructure.

The Indian case is made sharper by the country’s own industrial ambitions. The government wants India to become a manufacturing hub, expand infrastructure, build domestic supply chains and reduce dependence in key sectors. Those objectives cannot coexist easily with unlimited exposure to underpriced imports. The “Make in India” aspiration requires domestic firms to invest at scale. But investment becomes harder when producers fear that imported material can undercut them during every downturn. No boardroom will commit billions to new capacity if policy signals suggest that the market can be overwhelmed by dumped goods at critical moments.

At the same time, protection cannot become a substitute for competitiveness. This is the central balance New Delhi must strike. Trade remedies are legitimate when imports are unfairly priced and causing injury. They are dangerous when they become permanent shelter for inefficiency. Indian steel companies must not use anti-dumping duties as a shield against productivity improvement, technological upgrades or cost discipline. Consumers and downstream industries should not be made to carry inflated prices simply because upstream producers have political influence. Industrial policy must protect capacity, not complacency.

The government’s challenge, therefore, is to distinguish between strategic defence and routine protectionism. An anti-dumping investigation is an evidence-based process. It must examine pricing, injury, market share, cost structures and the behaviour of exporters. If dumping is established, duties may be justified. If the problem is merely that foreign producers are more efficient, the case for intervention becomes weaker. The credibility of India’s trade policy depends on this distinction. A country that seeks access to global markets for its own exporters cannot appear casual in restricting imports when domestic lobbies complain.

There is also a diplomatic dimension. India’s economic relationship with China is already shaped by distrust, border tensions and trade imbalance. Steel imports add another layer to a relationship in which India depends heavily on Chinese industrial goods while trying to reduce strategic vulnerabilities. Action against Chinese steel will be viewed through that broader lens, even if the investigation also covers other countries. New Delhi will have to show that the measure is based on trade law rather than geopolitical signalling. That is essential because India’s own exporters may face scrutiny abroad under the same rules.

The steel dispute also exposes a larger shift in the world economy. The era when globalisation was treated as an unquestioned good has passed. Supply shocks, pandemics, wars, sanctions, energy volatility and strategic rivalry have forced governments to rethink dependence. Free trade is no longer judged only by consumer price. It is judged by resilience, employment, national security and the ability to maintain essential industrial capacity. The steel industry sits exactly at that intersection.

For India, the lesson is not to abandon globalisation but to approach it without illusion. Open markets helped India integrate with the world, but openness without safeguards can create vulnerabilities. Trade policy must be pragmatic, not sermonising. When Indian goods face arbitrary restrictions abroad, New Delhi is right to object. When Indian industry faces unfairly priced imports at home, it is equally entitled to act. There is no contradiction if both positions rest on rules and evidence. The contradiction arises only when free trade is invoked as morality abroad and protection is practised as entitlement at home. (IPA Service)