Blatantly speaking, the steel industry is going through its roughest ever ride in history. Corporate profits are shrinking, capacities are lying idle, assets are not performing and prices refuse to stabilize.

Under such circumstances, it is difficult for the steel industry to survive. The survival of the fittest will ensure that only the most competitive firms will thrive and hence the question comes up, who is the most competitive of all firms. There was a long-standing mind-set that believed that the lowest cost producer and hence the lowest price seller was the most competitive. Such rules did very well for standardized commodities but did not go very far in the markets for customized products. As steel moved from being a mere commodity to becoming a differentiated product with a more varied set of specifications, price advantage took a back seat to other considerations. Disadvantages in quality, non-delivery on time and the non-availability of the right quality in the right quantity more often than not can set off the advantages on account of low prices.

We should also be more aware that with the progress of globalisation and the WTO agreements, there is likely to be a convergence of inputs prices and technical knowledge across countries. Few firms or countries will be able to claim competitive superiority on the basis of cheaper inputs or technical competence. What is more likely is now trade wars will become more and more discriminating against countries that may be found wanting in adherence to ethical and social audit norms.

Customers are increasingly likely to demand ethical standards in production, whether child labour has been used or not, whether labour has not been exploited, whether health and safety rules are adhered to or not and so on. Soon enough, these will become the "cutting edge" for any firm especially since we expect the input prices and technical parameters to largely converge all over the world. Third country trade and relocation of industrial capacities along the various stages of production into countries of strategic importance is likely to also take away the freight advantage. Therefore, social and ethical norms will become the differentiating factor in a country's exports.

The International Resources For Fairer Trade, henceforth known as the IRFT is a non-government organization that attends to the social and the ethical issues of industrial units. The IRFT's programmes are principally business counseling for the producer firms so that they may be able to fulfill the international standards and health, environment and safety and the fair labour laws. The IRFT does not try to impose a set of practices that is completely foreign to the Indian firms, but tries to address those issues that are compatible with the WTO from within the Indian legal framework. The IRFT suggests changes which are perfectly feasible and do not require much and sometimes any financial investments.

I had an eye-opening personal experience on how orders can be cancelled by international procurement agencies on the grounds that the potential suppliers were found to be moving in complete abeyance of the safety standards. A South African delegate visited Delhi's Wazirpur industrial area to procure stainless steel blanks in the 200 series. They cancelled an entire order because they found that the industrial units were very unsafe, electrical wires were hanging from everywhere, there was no drinking water in the premises and there were no proper toilets and bath areas. Hence, an entire bulk order as cancelled because such business practices were detrimental to the South African Constitution as well as to the ethos. What has happened in the Wazirpur can happen in any industry for any bulk order. This is a stark instance of how ignoring your ethical and social issues in business can spoil the profitability of your company.

There are similar instances of textile orders being cancelled because labour worked under exploitative conditions, carpets from Mirzapur were rejected by the customers in the West because they used child labour and in many cases, large bulk chemicals have been rejected when the procurement agency found out that they were manufactured under hazardous conditions. To my mind, ethical and social audit will indeed become an important cutting edge factor for international competitiveness. The JPC intends to start a business-counselling center for counseling prospective steel producers who wish to become globally competitive together with an introductory workshop with the international procurement agents who are keen to do business with us.