Bill C-101 (Historical)

An Act to amend the Customs Tariff and the Canadian International Trade Tribunal Act

This enactment provides for the repeal of subsections 55(5) and (6) of the Customs Tariff and their subsequent re-enactment two years later. It also makes consequential amendments to the Canadian International Trade Tribunal Act.

[The Chair, Liberal, Wayne Easter]

I shall call to order the meeting today pursuant to the order of reference of Monday, June 10, Bill C-101, An Act to amend the Customs Tariff and the Canadian International Trade Tribunal Act. We're dealing with clause-by-clause of the bill.

If there are any questions from anybody as we go through this, we have witnesses from the Department of Finance, International Trade and Finance Branch: Patrick Halley, Director General, International Trade Policy; and Michèle Govier, Senior Director, Trade Rules. As well, from the Department of Foreign Affairs, Trade and Development, we have John Layton, Executive Director of the Trade Remedies and North American Trade Division.

Are we ready to roll? Okay.

(Clause 1 agreed to on division)

There is a new clause proposed by the CPC in amendment CPC-1.

Mr. Poilievre.

[Catherine Cobden]

If I may, Bill C-101 removes a barrier to implementing safeguards right away, not in two years but immediately. What the bill says, before this amendment is put in place, is that you must wait two years before you can do safeguards again for the same product. What this amendment does is to give the government the flexibility to not have to wait that two-year period. By then, the industry will be gone if this stuff is flooding in like this.

We as an industry need more responsiveness, and we're glad that you as a government are putting a tool in place to be responsible.

[Michael McLeod, Liberal, Northwest Territories, NT]

It was mentioned here that Bill C-101 is the first step. When I come back in two years, I'm going to be dealing with further steps. Could you explain again what the expectation there is? I didn't really understand that.

[Catherine Cobden]

I would love to add to that. Thank you very much.

It's very nice to see you again, as well.

The first point I wanted to make was—maybe officially, because I've been doing this almost every day since 232 was resolved and lifted...but perhaps I should do that here at this committee—to express, on behalf of the Canadian Steel Producers, our gratitude and sense of relief of the 232 being lifted.

Why that's relevant to the question is, of course, because it gives us access again, without tariff, to our largest trading partner. There's a first big step.

To put it into context, we have two really important markets. About half of what we produce goes to the U.S. and half is for Canada. We've not solved—because we know there's lots of work to be done around the 232 agreement too—but we got some free trade back with the U.S.

In the Canadian market sense, that's what Bill C-101 addresses. It gives you the tool to act if that domestic market becomes destabilized by foreign imports pouring in. It's sort of a simple...we've done some great stuff together here, but we cannot forget here because it's 50% of our market. To add to Ken's point, there are certainly capacity and growth opportunities. We have substantial available capacity. I'll refer to my earlier comment on the growth in B.C. as an example. That was really facilitated by the safeguard.... In most of that period, the provisional safeguard was in place.

[Kim Rudd, Liberal, Northumberland—Peterborough South, ON]

The process, in fact, was streamlined to respond to exactly your comment. You've just highlighted for us that we need to do a better job of letting SMEs and other folks who rightly.... I can certainly see how the assumption is that it's an intimidating process. I'm not saying it's a walk in the park, but it is accessible, so thank you for that. That's good information to have.

I want to talk about the jobs, the 23,000 direct jobs and 100,000 indirect jobs that are related to the steel producers.

We talked about the breadth of the country and where those jobs are. I guess it's also about the opportunity for those companies and those jobs to grow. We talk about numbers as they are static right now, but this is a global opportunity in terms of market, and our ability to access that global market has the potential to grow those businesses. Do you have a sense of what the industry is feeling about how Bill C-101 is impacting their plans or thought processes, not just about being able to hold on but actually being able to access more international markets?

[Ken Neumann]

I think BillC-101 sends a message that the government is prepared to stand up and basically defend. We support that.

As I've said in my submission, our view is that they should also continue with the five products that they haven't imposed. To me, this is a bigger picture. We'd better be cognizant of the fact that we have international companies that operate around the world. If we don't pretend to look after their interests to make sure that they're not being unfairly...by people who are not playing by the rules and come in and dump, that's not going to help anybody.

Therefore, it's very important that we make sure our industry is protected. That's a job the government has to do and this is a step in the right direction.

[Ken Neumann, National Director for Canada, National Office, United Steelworkers]

Thank you very much, Mr. Chair.

My name is Ken Neumann. I am the National Director for the United Steelworkers in Canada. With me is Craig Logie, our trade counsel.

Thank you, all, for allowing me, on behalf of our members in the steel and aluminum industry, to address this committee to discuss Bill C-101.

As you know, the steelworkers' union has been at the forefront in advocating for strengthened trade measures to protect the domestic steel industry. At least 23,000 workers in Canada are directly employed in the steel industry, with another 100,000 indirectly employed. The United Steelworkers is by far the largest union in the steel and aluminum sector.

We are especially concerned for our members working in industries that are threatened by import surges, particularly as much of the world closes or restricts its steel markets. We support Bill C-101, but would also like to see concrete measures in place to protect Canadian steel markets and their workers.

This last year has been particularly difficult for our members in the Canadian steel industry. Over the last eight months or so we have seen over 700 temporary and permanent layoffs in communities from Calgary to Sault Ste. Marie; Hawkesbury, Ontario; and Montreal.

Moreover, the uncertainty created by the current steel trade situation has severely curtailed the industry's willingness to invest in Canadian steel facilities.

As we speak today, our steel sector and workers are still at risk from predatory practices of foreign producers who flout fair trade rules and who are now shut out of other markets.

It is critical that the federal government impose measures to stabilize our market and defend our national interests. As it is, the Canadian steel industry is vulnerable. While the U.S., Mexico and Europe have taken strong actions to defend their steel industry, the steelworkers have worked tirelessly to ensure that the illegal U.S. tariffs on Canadian steel and aluminum products were removed and that they not be replaced with a quota. We are pleased that they have finally been removed.

However, the agreement to remove the tariffs included provisions stating that the U.S. has the ability to reimpose tariffs should there be a surge in imports into Canada. Amendments to the Customs Tariff that would allow Canada to protect its market from the threat of import surges must not by symbolic. It is important that amended power under Bill C-101 be used to impose concrete measures to protect Canadian steel markets and steelworkers.

In the period during the initial imposition of U.S. section 232 tariffs on much of the world, Canada experienced a surge in the imports from non-NAFTA countries requiring temporary safeguards on seven steel products.

Just as an example, overall imports of steel into Canada surged by more than 140% from some countries in the aftermath of the section 232 tariffs. The provisional safeguards imposed last October were working to stabilize the steel market during this turbulent time.

With our ability to participate in trade cases before the Canadian International Trade Tribunal, the steelworkers were heavily involved in this year's hearings related to permanent safeguards on seven steel products. Our members produce six of the seven products that were considered in those hearings: rebar, energy tubular, hot-rolled sheet, heavy plate, wire rod and pre-painted. We were disappointed with the recommendations of the CITT, with the Department of Finance's decision not to extend the safeguards on five of the products.

Our concern is that this decision puts our members at risk should there be a surge in imports from countries seeking to avoid tariffs in the United States, or that have met their quotas in European markets. The U.S. maintains its 25% tariff on most of the world. Earlier this year, in February, the European Union announced that its provisional safeguard measures, tariff rate quotas, on 26 steel products would become permanent and should remain in place for three years.

As I have stated, it is our view that Canada cannot continue to be one of the few countries in the world that allows foreign steel to flood into its markets. The federal government must protect producers and workers; it's as simple as that.

Bill C-101 is a good first step, and we urge Parliament and the Senate to pass this legislation as quickly as possible, but we also add that the government's action must go further to ensure the stability of the Canadian steel market.

Further steps must be taken, including the reimposition of safeguard measures on five products that had been subject to the safeguard measures before April.

Thank you again for this opportunity to address the committee. I look forward to any questions you may have.

[David McHattie, Vice-President, Institutional Relations Canada, Tenaris]

Thank you, and thank you for accommodating me by telephone.

As a short introduction, Tenaris is a global steel company. We are also committed to local manufacturing, so in Canada we have around 1,000 employees in normal times. We have operations in Calgary, Edmonton and Sault Ste. Marie. We are part of the supply chain serving Canada's energy sector.

We support Bill C-101, and we do that from the perspective of a user and a manufacturer of steel and a supplier to a Canadian market that understands and recognizes the global implications of overcapacity. We felt them here in Canada.

We are a manufacturer, and we believe that's an important value for the Canadian economy. Why do we support this well-thought-out bill? Our objective, and I think a sound objective, is for the Canadian steel sector to be free from distortions based on rapid changes in trade flows, be those rapid changes as a result of dumping or even undumped goods that are changes of flows due to government causes or others.

It's an important tool, and it's just a tool, to limit trade exposure to these changes in trade flows. It's also an important part of a broader policy commitment to defend Canadian jobs, and that broader commitment includes the April 26 announcement by the Minister of Finance of a working group, which we also support, and we would like to see the rapid implementation of those recommendations. It's also consistent with Canada's NAFTA position, with Canada, the United States and Mexico competing against the world.

Tenaris is a global company. We have operations in all three countries, and we believe it's important that NAFTA competes as an integrated economy.

Our view is that there's no downside to this legislation. It is a prospective tool to be put into the tool kit to be available to be used when warranted. This tool is there at the finance minister's discretion in case we again see rapid changes in trade flows.

In short, as a reminder, it is a safeguard in our view, only to limit distortions of trade flows. It limited increases from the level of a historical standard. It did not limit imports at all. Any changes in price that any subsectors would have felt were likely as attributable more to global implications as they were to specific actions in Canada.

For these reasons we support this legislation 100% and would like to commend the Canadian government for all its actions over the last five years—which includes more than one political party—that have been working towards having a Canadian market free from trade distortions.

Thank you.

[Catherine Cobden, President, Canadian Steel Producers Association]

Good afternoon, Mr. Chair, members of the committee and fellow panellists. I appreciate the opportunity to be here.

My name is Catherine Cobden. I'm president of the Canadian Steel Producers Association. I'm here today representing our member companies, who are engaged in the manufacture of steel in five provinces across this country—Alberta, Saskatchewan, Manitoba, Ontario and Quebec. Our members employ 23,000 people directly and support 100,000 jobs indirectly. I'm pleased to be joined today by David McHattie, a member of our association. He will be providing additional remarks that build off the comments I'm about to make on behalf of the sector.

Thank you for the opportunity today to discuss Bill C-101 and the importance to the steel sector of its quick passage. It is critically important that this gets moved into Canadian law quickly. I think it's important context for your deliberations on the bill to understand that we are facing unprecedented global overcapacity of steel. Many countries, as you are probably aware, are taking trade actions that limit their domestic marketplace to the rest of the world. For example, you're aware of the section 232 measures in the United States. There are also safeguard measures in the EU, India, Egypt and Russia, to name a few. There are customs duties in Mexico, and the list goes on. As these actions have been put into place, the overall market is significantly exposed in Canada to high volumes and low-priced steel. For Canadian steel producers, this means that our domestic market continues to face grave risk. In the face of this context, our government must be ready to respond swiftly to the changes we're facing.

Thirty days ago or thereabouts, the federal government committed to taking strong action, using all legal avenues at its disposal to protect the steel industry and its workers from unfair trade practices. The CSPA welcomed this commitment. We intend to remain vigilant in ensuring that we act in response to these market changes. We believe Bill C-101 addresses a crucial gap in the existing legislation. It positions the government to act. By removing the two-year cooling-off period, the legislation is eliminating a significant barrier to responding and putting safeguards in place to address diversion in Canada. This tool, coupled with anticipated changes to enhance our overall trade remedy system, is necessary to continue to ensure a stable and robust Canadian steel market going forward.

The committee will be aware that safeguards stabilize the domestic marketplace and prevent surges of foreign imports. As we sit here today, the OECD estimates an overcapacity of around 540 million tonnes of steel. This is about 36 times the entire size of the Canadian market—36 times of overcapacity looking for a home. This is not fiction or fake news. This is the reality we face. We feel we need to have the tools—at your disposal—for implementation as soon as possible.

Our recent section 232 understanding between Canada and the U.S., which we're immensely grateful for, demonstrates the need for action and highlights that we see the world the same way as the U.S.—namely, that steel global overcapacity is a real and demonstrable threat and we must take steps to prevent surge and transshipment. While the U.S. section 232 tariffs were lifted on Canada, globally section 232 tariffs remain in place. There's a risk of millions of tonnes of offshore imports being diverted into our country. That risk continues to grow. By removing the waiting period, which is the intent of this legislation, this tool will be available to basically address this rapidly evolving circumstance.

I would like to address a few of the points we've heard in opposition to this bill before I cede my place on the floor. First, on the issue of western supply, I'd like to point out that Canadian steel producers are actively supplying western Canada. In the case of rebar, an example that is often cited, Canadian producers are on pace to account for a substantial amount of total market demand in B.C. this year. I would also like to point out that AltaSteel, Evraz, Gerdau and Tenaris, all members of CSPA, have steel plants in western Canada.

On the issue of regional exclusions, I direct your attention to the CITT consideration of these arguments in the past where they looked at this issue in great detail, and they determined it was not in the public interest to exempt regions from trade measures.

Finally, on the need for imports, Canadian producers have historically supplied 45% or thereabouts of the Canadian market, and we have substantial available capacity to supply more. The U.S. has historically supplied about 20% to 25% of the market, and imports have supplied the remainder. Safeguard measures, as you know, are meant to keep imports at historical levels, not prevent imports, but maintain them at a rational pace.

In closing the Canadian Steel Producers Association calls on all parties imperatively to support this bill and see it come into Canadian law as soon as possible. Our businesses, our workers and our communities are counting on it.

Thank you.

[John White, President and Chief Executive Officer, Canadian Automobile Dealers Association]

Thank you very much.

My name is John White, President and CEO of the Canadian Automobile Dealers Association. You've already met my colleague Oumar, who is our Chief Economist.

I would like to say, on behalf of the Canadian Automobile Dealers Association, or CADA, that I am very pleased to appear before this distinguished committee today.

CADA represents over 3,200 active small and medium-sized businesses. Our members employ close to 160,000 Canadians around the country. Our members contribute over $115 billion a year to the Canadian economy.

I would first like to congratulate the government on the recent agreement reached by Canada, Mexico and the United States for the removal of the punitive section 232 steel and aluminum tariffs and the subsequent countermeasures that were applied. These tariffs have disrupted the integrated North American supply chain and they've added unnecessary costs for businesses and consumers. The automobile industry has been particularly affected, with steel and aluminum being major inputs into vehicle production.

A number of auto manufacturers have already been on record stating that these tariffs have increased their costs, and for the most part, they've absorbed them. However, some have stated publicly that they have been forced to pass on cost increases and price increases to consumers and to dealers. Needless to say, last month’s agreement to lift these tariffs by the three countries is good for our highly integrated economies, consumers and dealers.

We appreciate the work of the Prime Minister, the Prime Minister’s Office, Minister Freeland and Minister Bains in ensuring that Canada’s auto sector would be protected and supported throughout the entire renegotiation process. I'd like to also thank them for initiating the steps to ratify CUSMA days after the steel and aluminum tariffs agreement was reached.

We also want to highlight the all-in Team Canada approach. We saw premiers, opposition MPs, former party leaders and prime ministers, along with members of the Canadian industry, reaching out to their American counterparts to reinforce the special trading relationship that we enjoy between Canada and the U.S. None of Canada’s success over the last year would have been possible without everyone's collective efforts.

Today, we are here to offer our comments in support of Bill C-101. This legislation will provide the government with the necessary flexibility to quickly react in response to abnormal trade patterns. In the case of steel and aluminum, the government will be able to take steps to protect the industry against foreign dumping. Steel and aluminum surges in Canada and the U.S. could trigger a new set of devastating tariffs, adding additional burden on the auto industry and North American supply chain, which could, in effect, threaten the ratification of CUSMA, and potentially have negative consequences and fallout once it is ratified.

Our franchised dealers want to ensure Canada is shielded from these surges and that additional disruption in the auto sector is avoided.

With an international trade space that is evolving fast and the kind of unprecedented, or should I say, unpredictable leadership coming from the U.S. administration, Canadian trade legislation should be flexible enough to provide lawmakers with the tools to rapidly take safeguard measures to support Canadian industries and workers.

Ultimately, our goal is to have the agreement ratified as soon as possible and to remove any obstacles that could slow its ratification.

I'd also like to add that our focus is to ensure the smooth and continued integration of the North American auto sector and that includes strong steel and aluminum sectors in Canada. Any measures that threaten to undermine this stability and integration will be bad for workers and the economy on both sides of the border. While we support Bill C-101, we caution that Canada take a hard look at any unintended consequences that this may have beyond the issue at hand.

Members of the committee, I'd like to thank you again for the opportunity to provide the perspective of the franchised new car dealers across the country on this important issue.

Thank you.

[The Chair, Liberal, Wayne Easter]

We shall call the meeting to order. Today we'll be hearing from witnesses on Bill C-101, An Act to amend the Customs Tariff and the Canadian International Trade Tribunal Act.

We have a couple of witnesses by teleconference. From Bunch Welding Ltd, we have Chad Bunch in Calgary. We have David McHattie with Tenaris in Vancouver.

We have three groups of witnesses here in person as well. I want to thank each and every one of the witnesses who came today on extremely short notice for an extremely hasty bill. We really appreciate the effort you folks made, either to come or to appear via teleconference. There are a number of others who I know wanted to appear, and we weren't able to make the connection.

We'll start with the Canadian Automobile Dealers Association. We have Mr. White, President and CEO; and Mr. Dicko, Chief Economist.

[Patrick Halley]

What we're doing now in a parallel process, which is going to loop back to concerns that we've heard about this bill, although not as part of a specific consultation on this bill.... On April 26, there was an announcement by Minister Morneau of consultation on a further strengthening of the trade remedies system. We've had discussions with the steel industry and with other stakeholders as well, including downstream manufacturers and users of steel, with respect to some of these issues and the trade remedy system. As part of those conversations, some views have been expressed with respect to Bill C-101.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Chair.

I thank the witnesses for coming to explain Bill C-101 to us.

First, we are talking about provisional safeguards, but are permanent safeguards planned? Is that a possibility the government is considering?

[Patrick Halley]

Okay.

It is a pleasure to be here today to discuss Bill C-101, An Act to Amend the Customs Tariff and the Canadian International Trade Tribunal Act.

Before I provide a description of the amendments proposed in the bill, it is relevant to remind you of the current context that has led to the bill.

Global safeguards are trade measures that may be imposed under World Trade Organization rules and Canadian law where there is evidence that an increase in fairly traded imports has caused, or is threatening to cause, serious injury to domestic producers. In October 2018 the government imposed provisional safeguards for a period of 200 days on imports of seven steel product categories: heavy plate, concrete reinforcing bar, energy tubular products, hot-rolled sheet, pre-painted steel, stainless steel wire, and wire rod.

In accordance with Canadian law, the government also asked the Canadian International Trade Tribunal, the CITT, to inquire into whether final safeguards that could last up to three years on these products were warranted. At the beginning of April, the CITT shared its findings that final safeguards were warranted on imports of heavy plate and stainless steel wire. As a result, the provisional safeguards on the remaining five product categories were terminated on April 29.

The customs tariff currently prevents the reimposition of safeguard measures on products that were subject to previous safeguards for a period of two years following their last imposition. As such, for the five products for which provisional safeguards expired on April 29, safeguards may not be imposed on them until April 2021. The amendments being proposed in Bill C-101 would temporarily remove the two-year moratorium on the imposition of safeguards for products that were recently subject to such measures.

As well, consequential amendments are being proposed to the Canadian International Trade Tribunal Act. These amendments are intended to be temporary. That's why they've been structured as follows.

First, the provisions setting out the prohibition on further safeguards in the customs tariff would be repealed upon royal assent. That's in subclause 1(1) of the bill. A consequential amendment is also made to the CITT Act to remove those references to these provisions during the period of time during which they are repealed. That's in subclause 2(1) of the bill.

Second, the same provisions that are being repealed would be reinserted two years after royal assent on both the customs tariff and in the CITT Act. These are in subclauses 1(2) and 2(2). The coming-into-force clause, which respected the two-year period after which it would be reinserted, is in the coming-into-force provision of the bill.

The amendments would give the government the flexibility, should the need arise during the two-year period, to respond quickly and appropriately by imposing safeguards where a substantiated surge of fairly traded imports harms, or could harm, Canadian producers and workers. The conditions for the application of safeguards, as provided for under Canadian law, remain unchanged, and would still need to be met in order for any further safeguards to be put in place.

That concludes our presentation. We'd be happy to take any questions you might have.

[Patrick Halley, Director General, International Trade Policy Division, International Trade and Finance, Department of Finance]

Thank you, Mr. Chair.

My name is Patrick Halley, and I am the director general of the International Trade Policy Division at the Department of Finance. I am joined by Michèle Govier, senior director within my division, as well as John Layton, executive director of the Trade Remedies and North America Trade Division at Global Affairs Canada.

It is a pleasure to be here with you to discuss Bill C-101—