Steelmakers seek new safeguards from Ottawa in face of вЂ?unprecedented threatвЂ™
Steelmakers are pushing the federal government for immediate safeguard measures to protect the industry, arguing they face an вЂњunprecedented threatвЂќ of steel flooding into the Canadian market as a result of U.S. tariffs.
The safeguard tariffs, considered emergency actions by the World Trade Organization, would apply to steel imports from all countries and are typically only imposed following an investigation by the Canadian International Trade Tribunal (CITT).
But under rules set out by the WTO, countries can impose provisional safeguards for up to 200 days pending the outcome of the investigation if there are вЂњcritical circumstancesвЂќ where a delay would damage the domestic industry in a way that would be difficult to repair.
Safeguard actions are rare in Canada and critical circumstances measures have never been taken before.
вЂњThereвЂ™s already so much diversion expected and the threat of diversion in the intervening period means a 200-day window before a safeguard is in effect is far too long,вЂќ said Joe Galimberti, president of the Canadian Steel Producers Association, which represents firms including ArcelorMittal Dofasco, Stelco Inc. and Algoma Steel Inc. вЂњSignificant commercial harm can occur in that interim period.вЂќ
The safeguards would be used not to block all steel from entering the country but to balance the market through a combination of levies and quotas, said Galimberti.
Fears of a damaging surge in imports arose after U.S. President Donald TrumpвЂ™s tariffs of 25 per cent on incoming steel and 10 per cent on aluminum came into effect on March 23. Temporary exemptions initially extended to Canada, Mexico and the European Union expired on June 1. With the U.S. barriers in place, industry associations have warned that steel products previously bound for the United States could instead be deflected to other markets.
The European Union launched a safeguard investigation in March just after the U.S. announced its first restrictions on steel and aluminum. Although a full investigation could take nine months, EU Trade Commissioner Cecilia Malmstrom told Reuters that measures could be taken as early as July to shield producers based on preliminary findings.
In a statement, the Ministry of Finance said it вЂњcontinues to monitor the trade situation closely and will take additional steps as needed to support its industries.вЂќ
вЂњThis includes working closely with the steel industry to determine whether any broader trade measures, such as safeguards, may be appropriate to address the diversion of steel into the Canadian market.вЂќ
Galimberti said members of his association have shared a вЂњsignificant amountвЂќ of commercial information and evidence with government officials and вЂњare comfortable showing that there are numerous product categories demonstrating a surge or a threat of a surge in imports that would justify safeguard action.вЂќ
Safeguards require objective evidence that a rise in imports has caused or threatens to cause serious injury to the industry. Unlike anti-dumping laws, which target unfairly traded products, safeguards target fairly traded goods from all exporting countries, said Debra Steger, a professor of law at the University of Ottawa and the first director of the WTO appellate body secretariat.
вЂњThis is why they are a very tricky action to take politically,вЂќ Steger said. вЂњThey arenвЂ™t taking action against the United States, which is the government that imposed the original tariffs, they are taking action against everyone else. And those countries are likely also suffering because of the U.S. tariffs.вЂќ
But there are other ways to address damage in the industry beyond tariffs, Steger said.
вЂњThere is always adjustment assistance,вЂќ she said, citing the Quebec governmentвЂ™s move to provide $100 million in loans to small steel and aluminum producers affected by the U.S. tariffs. вЂњThis is always an option and frankly, itвЂ™s better economically.вЂќ
Meantime, the plea for immediate steel tariffs has raised concerns from importers of the alloy, who worry that a levy could ensnare specialty steels that arenвЂ™t available in Canada. While a conventional investigation by the CITT might be appropriate, immediate measures could lead to unintended consequences, said Peter Clark, a trade strategist with Grey, Clark, Shih and Associates who represents a variety of downstream producers.
Canada exported 7.7 million tonnes of steel in 2017, compared to imports of 8.8 million tonnes, according to the World Steel Association.
вЂњYou have to understand that there are manufacturers in Western Canada who canвЂ™t get their steel from mills in eastern Canada,вЂќ he said. вЂњThere are so many dimensions to this problem that we should not be looking for a quick and dirty solution.вЂќ
Proponents of the measure say it would have a mechanism to enable certain steels to be excluded from the tariff. And while mounting a tariff wall might seem at odds with CanadaвЂ™s image as a champion of free trade, a safeguard measure would only be taken in compliance with WTO law. This move would stand in contrast with the вЂњunilateral actionвЂќ taken by the U.S. in imposing its tariffs, said Lawrence Herman, an international trade lawyer at Herman and Associates representing smaller firms involved in the issue.
вЂњThere may well be other countries that donвЂ™t like what Canada is doing but the fact is Canada doesnвЂ™t have any other choice,вЂќ he said. вЂњI think Canada would prefer not to take safeguard action, but the U.S. has made it impossible not to.вЂќ