Federal MPs representing ridings affected by American tariffs on Canadian steel exports say they’re skeptical that a quota-based system can be a solution to the ongoing trade dispute, even after one major steel producer recently stepped forward to tell the House International Trade Committee that it would support certain quotas in exchange for a duty exemption.
At the committee meeting on Oct. 2, Kaylan Ghosh, president and CEO of Algoma Steel, located in Sault Ste. Marie, Ont., recommended the government “explore a quota-based system” as a solution for securing tariff exemptions.
Mr. Ghosh signalled openness to accepting a quota system similar to what Canada and the U.S. agreed to in the United States-Mexico-Canada Agreement (USMCA) on autos. Under the agreement in principle, Canada and Mexico will not be slapped with auto tariffs unless exports exceed 2.6 million units annually—a threshold significantly higher than current export volumes.
Such a scenario isn’t ideal for the industry, he said, but given that U.S. President Donald Trump indicated that quotas are his preferred approach, and that other countries have bowed down to those conditions, Canada could negotiate a similar fix.
Mr. Ghosh said a potential system should reflect historic exports levels to the U.S., and have the quota distributed company- and product-wise to ensure fairness and certainty over exports reaching American buyers. His company represents 40 per cent of the Sault Ste. Marie’s economic output, a city that has seen major job losses in the sector in the last generation.
His remarks to MPs came a day after USMCA was formally agreed upon by the three member countries, although the steel and aluminum tariff spat remains unresolved. On Oct. 1, Mr. Trump told journalists on the White House lawn that the tariffs will remain “until such time as we can do something different, like quotas, so that our industry is protected.”
Prime Minister Justin Trudeau (Papineau, Que.) told reporters in Ottawa that same day that eliminating the steel and aluminum tariffs remains a “priority.”
While Mr. Trump possibly indicated a negotiated quota as a preferred answer, it’s unclear what a hypothetical system would look like.
In March, the U.S. and South Korea reached an agreement on a steel export quota that exempted the country from 232 tariffs, although the Americans set a “hard” quota on 70 per cent of annual average Korean steel exports to the U.S. based on 2015-17 figures. Steel up to that threshold would be tariff-exempt and any exports above it from South Korea, the third-largest steel exporter to the U.S., would be turned back.
In June, the U.S. slapped a 25 per cent tariff on imported Canadian steel and 10 per cent on imported Canadian aluminum, respectively, only to be countered by retaliatory Canadian tariffs on U.S. steel, aluminum, and a variety of other products.
The American duties were levied based on “national security” grounds—often called Sec. 232 tariffs from the part of a 1962 Trade Expansion Act cited by the White House—but were widely seen as a pressure tactic on Canada to reach an agreement around a re-negotiated NAFTA.
Liberal MP Terry Sheehan (Sault Ste. Marie, Ont.), a committee member, said it’s difficult to stake a position on a quota system because such a proposal could mean many different things.
“I don’t know what the quota would look like. I would reserve judgment,” he said. “There could be a thousand different scenarios of a quota being put in place.”
Mark Rowlinson, assistant to the national director of the United Steelworkers, which represents more than 250,000 members in Canada, said the United Steelworkers doesn’t believe that a quota-based system would fairly apply across the Canadian steel producing industry.
“The industry itself will not be able to easily even recommend any kind of a quota because they’re all competitors,” said Mr. Rowlinson.
“For them, it all becomes a question of how can I extract the most competitive advantage through this quota. … There’s no way in our view of coming up with a quota that doesn’t some way adversely affect the Canadian industry.”
NDP MP Scott Duvall (Hamilton Mountain, Ont.) shared a similar sentiment, and said “it all depends on what the quotas were.”
“But that basically gives the big fish [the opportunity] to eat up the small fish. That’s the way I look at it,” he said, adding that if a potential quota limits steel production in Canada, it’s “not a good answer for growth.”
Mr. Rowlinson said he isn’t surprised that Algoma is supportive of this idea, because much of what they produce ends up across the border and they’re paying a steep price in tariffs: “For them, as long as the quota incorporates what it is they are presently shipping to the United States, they’re good.”
NDP MP Tracey Ramsey (Essex, Ont.), her party’s international trade critic, said the committee is conducting a study on the impact of the tariffs and has yet to hear from enough stakeholders to assess if quotas could work.
“Until we hear from all of the players, it’s hard to say. There have been mixed reports on the use of quotas,” she said. “It’s not something I would say is widely supported. Both of those things have to be taken into consideration.”
Joe Galimberti, president of the Steel Producers Association of Canada, said the “consensus industry position” has always been and remains the elimination of any and all trade barriers in steel and aluminum in North America.
“We’re willing to engage in discussions with the U.S. that finds a solution that meets our needs while at the same time, respecting the policy goals they’ve enunciated in 232,” he added.
Mr. Galimberti said the impact of the tariffs on steel producers disrupted the finances of steel manufacturers and the establishment of supply chains with American buyers.
Foreign Affairs Minister Chrystia Freeland’s (University Rosedale, Ont.) press secretary Adam Austin wouldn’t provide details about any future face-to-face talks, but told The Hill Times that “we continue to discuss the section 232 tariffs with our U.S. counterparts.”
All-party steel caucus meets this week
The cross-party “steel caucus” contains eight MPs representing ridings with significant steel industry activity, which includes Mr. Sheehan, Mr. Duvall, and Ms. Ramsey.
They’re set to meet this week, according to caucus chair Liberal MP Bob Bratina’s (Hamilton East-Stoney Creek, Ont.) office. The group also includes Seniors’ Minister Filomena Tassi (Hamilton West-Ancaster-Dundas, Ont.), Conservative MP David Sweet (Flamborough-Glanbrook, Ont.), and MPs Erin Weir (CCF Regina-Lewvan, Sask.) and David Christopherson (NDP Hamilton Centre, Ont.)
Mr. Duvall said he’s hoping the meeting provides members an update on where the government is with providing relief for businesses that have been disrupted.
“We’ve got no answers at this particular time. All we’re getting is, ‘This is a win-win for Canada.’ [But] the steel and aluminum industry has lost big time. … You get the bigger companies that can go through with this in the short term. But the smaller companies are struggling now on a day-to-day basis.”
Companies affected by the tariffs, including small- and medium-sized businesses, can apply to Export Development Canada and the Business Development Bank of Canada for financial aid to help maintain operations.
A quarter-billion dollars worth of federal relief for the steel and aluminum firms will be provided under the Strategic Innovation Fund, a program meant for larger projects with innovative potential.
Innovation Minister Navdeep Bains (Mississauga-Malton, Ont.) told The Hill Times last month that it has received more than $1-billion of submissions “that aim to improve cost and environmental efficiency of production as well as improve product offerings where they see a demand today and into the future.”
“We have worked closely with producers over the course of the past several weeks who have identified projects that can make their operations more competitive and serve international and domestic markets better,” he wrote on Sept. 30. “Negotiations are going well with companies and announcements are expected to be made in the coming weeks.”
On Oct. 11, Finance Canada also announced that companies who have applied for and been granted relief by the federal government won’t have to pay surtaxes on imported steel, aluminum, and other products.
Ms. Ramsey said constituents, particularly small businesses, are struggling to navigate the process to secure relief from the tariffs.
She said her office has been writing letters of support, petitioning the government to approve exemptions that would allow them to import steel that can only be sourced from the U.S., without having to pay the duties.
“These are folks who have under 50 employees and they just don’t have the margins to weather these tariffs. It really is threatening the viability of their business,” she said. “For us down here in Essex, we really rely on the manufacturing sector. Our entire ecosystem is under threat and bearing the brunt of these tariffs.”
Ms. Ramsey said the NDP has been urging the government to set up a national task force that could help smaller businesses understand the requirements needed to avail of the aid.
In the face of frustrations from opposition MPs who argue the Liberal government has lost whatever leverage it had for negotiating an end to the tariffs, Mr. Sheehan said, “We have to redouble our efforts our resolve to continue to work together in this Team Canada approach, because I think it’s extremely effective.”
On Oct. 11, Finance Canada announced provisional safeguard measures against the dumping of foreign steel into Canada, subjecting seven imported steel products to a surtax of 25 per cent in cases where imports exceed historical levels, to come into effect on Oct. 25. In August, the government announced a 15-day consultation period on potential measures.
The federal government also requested the Canadian International Trade Tribunal to investigate whether the safeguards are warranted. The tribunal found in July that there is reasonable indication that steel dumping has harmed or could harm domestic producers. The safeguard measures will be in place for 200 days pending the tribunal’s findings.
Canada’s steel industry grew worried about cheap Asian steel flooding into Canada after the U.S. slapped tariffs on steel exports from most countries, including China, in March. Ottawa was warned then that the country could see a significant uptick in cheap steel imports as a consequence of American tariffs.
Mr. Rowlinson said on Oct. 9 that there’s been a 75 per cent spike in flat steel imports into Canada, and was “puzzled” that the government hadn’t implemented safeguards yet.
Ms. Ramsey said “what’s happening over the last year, it’s exactly what the industry warned. We’ve become a bull’s eye for global dumping.”