Steelmakers press feds for immediate safeguards

Industry wants rare emergency action, fearing flood of imports after U.S. tariffs

Steelmakers are pushing the federal government for immediate safeguard measures to protect the industry, arguing they face an “unprecedented threat” 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 “critical circumstances” where a delay would damage the domestic industry in a way that would be difficult to repair. Safeguard actions are rare in Canada and such measures have never been taken before. “There’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,” said Joe Galimberti, president of the Canadian Steel Producers Association, which represents firms including ArcelorMittal Dofasco, Stelco Inc. and Algoma Steel Inc. “Significant commercial harm can occur in that interim period.” Fears of a surge in imports arose after U.S. President Donald Trump’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. Industry groups have warned that steel items previously bound for the U.S. 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 “continues to monitor the trade situation closely and will take additional steps as needed to support its industries.” “This 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.”

Galimberti said members of his association have shared a “significant amount” of commercial information and evidence with government officials and “are comfortable showing that there are numerous product categories demonstrating a surge or a threat of a surge in imports that would justify safeguard action.” Safeguards require objective evidence that a rise in imports has

A 200-day window before a safeguard is in effect is far too long.

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.

“This is why they are a very tricky action to take politically,” Steger said. “They aren’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.” But there are other ways to address damage, she said. “There is always adjustment assistance. ... This is always an option and frankly, it’s better economically.” She cited the Quebec government’s move to give $100 million in loans to small steel and aluminum firms affected by the tariffs.

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. 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 aren’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.

“You have to understand that there are manufacturers in Western Canada who can’t get their steel from mills in eastern Canada,” he said. “There are so many dimensions to this problem that we should not be looking for a quick and dirty solution.”