Finance Committee on June 11th, 2019

[The Chair, Liberal, Wayne Easter]

Dean, do you want to go now or do you want to come back?

[Dean Allison, Conservative, Niagara West, ON]

Sure, if you don't mind.

[The Chair, Liberal, Wayne Easter]

Go ahead.

[Dean Allison, Conservative, Niagara West, ON]

I'm just hoping that I can review the timelines a bit. In order to put the safeguards on, it's just order in council. It's not difficult to do. It could be done any time in terms of the process, correct?

[Michèle Govier]

Yes, it's an order in council.

[Dean Allison, Conservative, Niagara West, ON]

Yes, exactly.

I believe the U.S. has been asking us since the summer of 2017 to deal with this issue of leakage and transshipments, and all of that kind of stuff. That's what I get from the media. I'm not asking you whether or not you can confirm that; we know these safeguards went in last year, in 2018.

In your opinion, when we look at the steel and aluminum tariffs that we've had to deal with over the last little while, is this the result of our not dealing with the issue of safeguards? Is this an issue of the U.S. asking us to deal with an issue that we, quite frankly, ignored for over a year? Are there any thoughts at all on that?

[John Layton]

I don't think the U.S. tariffs have anything to do with Canada imposing measures on other countries. While there have been reports that the U.S. was concerned about transshipment, we never had discussions with the United States about specific concerns of theirs with transshipments; nor did the U.S. ever ask us to impose measures to address transshipment.

The timing of the safeguard inquiry and the provisional measures that we had, I don't think had any impact on the fact that the U.S. imposed section 232 tariffs against Canada.

[Dean Allison, Conservative, Niagara West, ON]

Do you not think that even though, for a year or so, Mr. Trump talked about the fact he wanted us to do something about that, and we didn't, and the fact we had section 232 tariffs thrown at us, had nothing to do with the fact we didn't deal with any of the leakage or transshipment of steel?

[John Layton]

I don't think so. At the beginning, he mentioned the link to NAFTA. At first we thought that. We did explore the issue of whether there was something we could do on transshipment, but we never discovered what the problem was with transshipment.

[Dean Allison, Conservative, Niagara West, ON]

Okay. Thanks.

[The Chair, Liberal, Wayne Easter]

It's always good when someone has President Trump figured out.

Mr. Sorbara.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Mr. Chair.

Welcome and thank you for the answers to some of these in-depth connected issues.

I want to back up and get on the record that between the CITT and the Department of Finance, there are seven categories of steel or steel-related products that we are speaking of—backing up in terms of the process that has gotten us to where we are.

[Michèle Govier]

There were seven steel product categories on which provisional safeguards were imposed in October. Then the CITT ruled on those. Two of those categories now have final safeguards applied, and there are five that do not have safeguards applied.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

My question is with regard to the import of steel that which we may not have sufficient domestic production of. Let's say you're building a pipeline and you need to import steel from overseas, and the monthly data comes in from CBSA and the Department of Finance. We will account for that. If there's a surge one month, or say there's an increase one month in the amount of steel coming in, we're not just going to look at that month and say that something weird is going on. We're going to look at that month and say this is related to a project that is going on in Canada. For example, in western Canada, some steel consumers may need to purchase their steel overseas because there's just not enough domestic production.

How technical is that? Can you explain that process, please?

[Michèle Govier]

On the surge, you're right. If it's a one-month thing, that would likely not trigger the government to impose provisional measures or the CITT to conclude that this is a surge according to the definition required by the WTO rules. They do look at a longer period. Certainly, in determining whether provisional safeguards would be warranted, we would look at patterns during a particular period to see whether they constituted a surge and action needed to be taken.

I spoke earlier about whether certain product types could be excluded if there are things that aren't actually made in Canada, and there might be other mechanisms to address situations in which we know that the imports are required because of contractual reasons, or whatever.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Exactly. Thank you for that, because I think what we need to get on the record is that we have a really robust, healthy steel industry in Canada. We've removed the uncertainty of the section 232 tariffs that were placed by the U.S. administration. We've come to an agreement there, which is great.

At the same time, while we ensure that we can guard against surges in imported steel—steel that I would argue is made in some jurisdictions under less environmentally stringent methods and procedures than those here in Canada—we can also ensure that any domestic consumers of steel, when the steel cannot be sourced locally in Canada, the United States or Mexico, will have access to that steel without the predicament of then having CITT investigate an increase—I'm not going to call it a surge—of steel over a two- or three-month period related to a specific project.

[Patrick Halley]

Maybe in addition to what Michèle was saying, I think that if safeguards are imposed in the manner of tariff free quotas, there is a quantity that reflects historical imports from offshore sources and that would be surtax free. The aim is not to disrupt the marketplace for those who use offshore imports, but to at the same time prevent surges from happening that are injurious.

Maybe I'll just add that we faced that situation with the countermeasures imposed against steel from the United States, where we had situations in which people were coming to us and saying they could only source it from the United States, for example. We worked under a remission framework that we published, and we did provide remission to importers.

We worked fairly well with the industry in asking our steel producers whether these were products that were really in short supply in Canada and not made in the quantity needed by importers. I think that under the circumstances, that process has worked out as well as it could.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Chair, could I add something?

[The Chair, Liberal, Wayne Easter]

Go ahead.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Chair.

As an economist by training, the circumvention of trade rules is obviously something that I studied extensively in graduate school years ago, but it's something that concerns me quite a bit.

When you have steel-producing country A, then you ship via country B and it's tagged by country B, and it ends up in the Port of Vancouver or the Port of Halifax, whichever one in Canada, that could cause distortions in our market and we obviously need to track it quite closely. I know that within budget 2019 there were extra resources provided to CBSA. Then it falls to the CITT to do that.

Are the resources in place for those officials on the ground to ensure that we can track it if there is a surge in a certain category of steel that does not have a safeguard on it today, resources that could be in place tomorrow if they needed to be?

[Patrick Halley]

As you mentioned, more resources have been given to the Canada Border Services Agency, I believe, to hire up to 40 new officers to deal with compliance issues. The 40 officers are a 50% increase in the number of people doing that kind of work, so it is a meaningful increase.

At the same time, to prevent situations like that, other changes were also made to the rules for marking of products to make sure that when it says it's made in a certain country, it is really made in that particular country and not being masked as an import from elsewhere to circumvent the rules. These changes were made last spring to really beef up and strengthen compliance with the trade rules in Canada.

[The Chair, Liberal, Wayne Easter]

Mr. Dusseault.

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

Thank you.

I would like to come back to certain things that have been said so far, including the fact that five product categories are currently unprotected, so they are not subject to any safeguards.

Following the passing of this bill, when do you expect to apply new safeguards to those five product categories?

[Patrick Halley]

As I said, the bill provides some flexibility if market conditions change and the conditions set out in the legislation are met. Those conditions remain unchanged. So there must be an increase in imports and the potential of serious injury caused to domestic producers. None of that is changing.

The process the government followed to impose provisional safeguards in October was in response to an official request by industry. In August, a 15-day consultation was held. Afterwards, the situation was analyzed. It was announced—I think on October 11—that provisional measures would be imposed as of October 25. We think that process was justified and that it could be used again.

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

In other words, there will not automatically be any new provisional measures. It will depend on a process similar to the one used in the past.