Morneau continues trade action on 2 foreign steel products, drops it for 5 others

Only two kinds of foreign steel imports, heavy plate and stainless steel wire, will continue to face trade remedies to protect Canada's steel industry, Finance Minister Bill Morneau announced Friday.

His decision on final safeguards follows the advice of the Canadian International Trade Tribunal, which earlier this month found no justification to continue a surtax on five other products that have also been subject to a provisional 25 per cent surtax since last October.

That provisional surtax on concrete reinforcing bar, energy tubular products, hot-rolled sheet, pre-painted steel and wire rod ends on Sunday. The surtax was triggered only when import volumes exceeded historical averages.

Friday's release from the Finance Department did not specify what form the final safeguard action against these two products would take. Morneau's office said that would be announced "in the coming days."

Canada's steel mills and the United Steelworkers union had asked the minister to overrule the tribunal and impose final safeguards on all seven products.

In a release late Friday, the president of the Canadian Steel Producers Association said she was disappointed.

"Steel producing nations around the world are implementing these trade measures and Canada's failure to do so means we are more dangerously trade exposed than ever before," said Catherine Cobden, warning that not having safeguards in place could "lead to the loss of thousands of jobs, put $1.1 billion in planned investments at risk, and see the erosion of our competitiveness."

But if Morneau acted against the recommendations of his own quasi-judicial tribunal, it would have been difficult for Canada to say it respects evidence-based decision-making and international trade rules.

Prime Minister Justin Trudeau has met with several steel executives in recent months.

Several of his senior ministers, including Morneau and Foreign Affairs Minister Chrystia Freeland, whose name was also on this announcement, have repeatedly turned up at Canadian steel mills for meetings and photo opportunities, as the government wrestled with how to respond to the 25 per cent steel and 10 per cent aluminum tariffs imposed on Canadian exports by the Trump administration last summer for "national security" reasons.

Friday's release said the Trudeau government is starting an "intensive, 30-day consultation with industry and workers, in order to determine what further protections are required."

More protection coming

A working group is being formed to "ensure that the views of workers and industry continue to be heard and are acted upon without delay," the release said.

It also promises "within the next few weeks" to "take every legal action at its disposal to protect Canadian jobs," including:

• Reviewing potential dumping cases to see if higher duties are warranted to ensure Canadian products are not disadvantaged.
• Strengthening data collection to track the quantity, type and origin of imports and better respond to any surges, transshipments (steel that originates in one country but is shipped from another to dodge duties or tariffs) or other sudden changes in trading patterns.
• More flexibility for the Canada Border Services Agency to address price and cost distortions in foreign markets when determining if dumping has occurred.
• More guidance for the CBSA to determine when trade remedy cases should be self-initiated over unfair prices or subsidies.
• More consultation on the rationale for the remission (refunding) of surtaxes on U.S. imports, to encourage the use of Canadian-made steel.
• More support for domestic producers from Innovation, Science and Economic Development Canada and its agencies.

The federal government has already put in place a $2-billion assistance package for Canada's steel sector. According to publicly announced funding decisions, much remains unspent. An additional $100 million of support for small- and medium-sized producers and manufacturers was announced earlier this year.

The emergency safeguards process Morneau has just been through — imposing preliminary surtaxes for 200 days, followed by the tribunal investigation of their merits, leading to Friday's final decision on longer-term measures — complied with Canada's obligations under the World Trade Organization.

Failing to respect the tribunal's findings could have triggered retaliation or challenges from other steel exporters.

These emergency safeguards did not apply to imports from the United States, which have faced separate retaliatory tariffs since the Americans slapped an extra levy on Canadian steel and aluminum exports last July.

Some other countries with whom Canada has trade agreements, as well as a list of developing countries, also were not included.

The safeguards were also separate from other anti-dumping and countervailing duties Canada already has in place for specific steel products from countries like China and Vietnam.

U.S tariffs persist

Ever since the U.S. imposed its "national security" tariffs last year, the Canadian steel industry has warned about cheap foreign steel being diverted north, disrupting Canada's domestic market.

But the tribunal did not consistently find evidence of surges for all seven products it investigated, and even when there was a noticeable increase in imports, it did not always find those imports to be a threat to the stability of the domestic market.

Canada's safeguards ensured a 25 per cent tariff wall shielded producers in both Canada and the U.S. from foreign competition.

Once in place, it became more difficult for the Americans to accuse Canada of acting as a back door through which cheap steel could sneak into the U.S. — and harder for Americans to argue they needed their protective tariff on Canadian products.

Nevertheless, the U.S. did not respond by lifting its steel and aluminum tariffs on Canada.

Meanwhile, the surtaxes risked serious damage to Canadian construction firms, pipeline companies and other downstream manufacturers that needed affordable steel.

Some reported supply shortages and other disruptions to their businesses that risked potentially more jobs than could be protected at steel mills.

Officials, including Canada's ambassador in Washington David MacNaughton just this week, have said Canada will not ratify the renegotiated North American trade agreement while the U.S. tariffs remain in place.