Aluminum exclusion via USMCA could give China a back door, industry warns
‘Canada fought, but they lost’: Mexico stands firm as rules undergo change
The exclusion of aluminum from tighter auto requirements in the new North American free trade pact could see Mexico become a back door for China to push the metal into the United States, industry officials and union leaders say.
Canada, the United States and Mexico agreed Tuesday to the United States-mexico-canada Agreement (USMCA) that includes tougher enforcement provisions for labour reforms, a strengthened dispute resolution mechanism, and weaker protections for the pharmaceutical industry.
The deal also included a last-minute change to a requirement calling for 70 per cent of the steel and aluminum used in auto production to be purchased in North America. Under the newly tweaked rules, steel must be “melted and poured” by primary steelmakers in North America in order to receive preferential tariff treatment.
No provision was added for aluminum.
Though the United States and Canada — the latter the dominant aluminum producing country in North America — fought hard for the metal to be included in the clause, Mexico would not concede, said Jean Simard, president of the Aluminum Association of Canada.
“They fought, Canada fought, but they lost,” Simard said. “At the very end Mexico said ‘This is my red line. That’s enough’.”
On Wednesday, the Conservatives and the Bloc Québécois accused the Liberals of mishandling revisions to the deal, suggesting they could delay its ratification. The Conservatives complained that Liberals had not consulted them in the final stages of the talks, while the Bloc pledged to vote against the treaty on the grounds that it did not protect Quebec’s aluminum industry.
“When will the prime minister realize that here at home he doesn’t have control of Parliament and he needs the support of Opposition before finalizing major agreements?” Conservative legislator Leona Alleslev said in the House.
Bloc Leader Yves-françois Blanchet called the deal a catastrophe for Quebec’s aluminum workers and accused Trudeau of abandoning the industry.
Trudeau lost his majority in the House of Commons in an October election and needs the support of other parties to quickly push through ratification. Opposition legislators can engage in procedural manoeuvres to delay the process.
Canada is the fourth-largest aluminum producer in the world and by far the largest supplier to the United States, providing 2.8 million tonnes, or just over half of all aluminum consumed south of the border. Nearly all of that comes from Quebec, home to eight of Canada’s nine smelters.
By contrast, Mexico has no aluminum smelting capacity of its own and instead relies on imported aluminum scrap and billets, which it melts and recasts into parts for the auto sector.
“They import from wherever they want, all around the world, they play the market, play prices and they want to protect access to those various sources of metal,” said Simard. “This is fine until you end up with metal coming in at discounted prices from China and elsewhere that seeps its way into the U.S. market and makes this an unlevel playing field.”
Asked about the issue during a press conference in Mexico City on Tuesday, Deputy Prime Minister Chrystia Freeland noted that under the North American Free Trade Agreement, Canada is the only significant producer of aluminum with tariff-free access to the U.S. market. The new changes retain that access, she added.
“What they do is clear a path for ratification of the new NAFTA in the U.S.,” she said.
The United Steelworkers, the largest union representing steel and aluminum workers in Canada, was also disappointed by the new provisions particularly a detail stating that the steel melt and pour requirement will only begin seven years after the signing.
“During that seven-year period, it will continue to be the case that foreign steel could make its way into the automotive supply chain,” said Mark Rowlinson, assistant national director for the union. “And in the meantime, there is lots of capacity in North America to satisfy auto sector demand.”
As part of an agreement that saw the Trump administration lift its steel and aluminum tariffs, Canada and Mexico agreed to establish import monitoring systems to prevent the illegal trade of steel and aluminum. Canada’s system, in effect since September, includes more aggressive tracking of imports, inspections and penalties for illegally traded steel.
Mexico has yet to establish its own system, Simard said.
“The USMCA is a good agreement and we are glad they got rid of the tariffs,” Simard said. “The next step is to get that monitoring system established in Mexico.”