Evidence of meeting #219 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was products.
A video is available from Parliament.
Director General, International Trade Policy Division, International Trade and Finance, Department of Finance
Some conditions must be met.
As Ms. Govier vas saying, the increase in imports is more quantifiable and it may be easier to obtain data on that, even for us, while we continue to closely follow steel imports in general. However, the law also requires injury to be caused or potentially be caused to producers. It is up to producers to inform us; that is the way to justify the existence of injury or threat of injury.
Pierre-Luc Dusseault NDP Sherbrooke, QC
The bill we are preparing to pass in committee and in the House will have a two-year lifespan. So it will no longer be valid two years after the royal assent. Have I understood correctly?
Director General, International Trade Policy Division, International Trade and Finance, Department of Finance
Yes, that's right.
Director General, International Trade Policy Division, International Trade and Finance, Department of Finance
The intention was to provide some flexibility, but on a temporary basis, given the situation of the market as a whole. The trade environment is fairly complex for many products, but even more so for steel.
So this is about providing flexibility to use safeguards again during that two-year period, as needed. If final safeguard measures were imposed, they could stay in place. That is the case for stainless steel wire and heavy plate—products for which final safeguards were established for three years. In other words, if, during the two-year period, the conditions are met and final safeguards are imposed, they can come into force as late as the last day of that two-year period and end, for example, three years later.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
As far as I understand, the 200-day measures remain. In the two-year period following the royal assent, you will have the possibility to impose provisional measures again that will last a maximum of 200 days.
Director General, International Trade Policy Division, International Trade and Finance, Department of Finance
Yes.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
During that period, a ruling from the tribunal could make it possible to extend that period by three years through final safeguards.
Director General, International Trade Policy Division, International Trade and Finance, Department of Finance
That's right.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
How did you decide on that two-year temporary period? Is it related to our international obligations?
Earlier, it was not clear. We were being told that other countries proceeded in that manner, but that our international obligations did not require such a system with a tribunal and provisional measures that expire after 200 days.
If there are no problems with our international obligations, why choose this?
Senior Director, Trade Rules, International Trade and Finance Branch, Department of Finance
We have proceeded in this way in the past, by including in our legislation the two-year period prescribed by the WTO rules.
I think the intention is to confirm the temporary nature of that change. A two-year period is long enough to analyze the situation and decide whether it is necessary to impose safeguards. I think that, if the period was shorter, the 200-day time frame would expire and the tribunal may lack time to finish its process. The selected period gives us enough time to decide whether or not to impose measures.
There is nothing scientific about it. The intention is to confirm that the change is temporary and that we will afterwards go back to applying the law as it was.
Liberal
The Chair Liberal Wayne Easter
I don’t believe we have any questions on the government side.
Mr. Poilievre, I believe you have one or two, or more. Your tie looks good.
Conservative
Pierre Poilievre Conservative Carleton, ON
Thank you, Chair.
The question I have is a little broader than about the legislation. Steel dumping or dumping of any product implies that the selling country is actually losing money or selling below its cost to gain market share. I've never quite understood why a country would want to do that. There’s an old ironic expression that the company loses money on every sale but makes it up on volume. Anybody or any country that’s selling consistently at a loss is actually draining its own wealth. Why do countries do this?
Senior Director, Trade Rules, International Trade and Finance Branch, Department of Finance
That is a larger question. Dumping is the behaviour of individual companies, so I think we need to distinguish between dumping and subsidization. I think on the subsidization side, where a government is providing assistance to a company, the company itself is not necessarily losing money on that. They can charge lower prices because the subsidies make up for that.
On the dumping side, there could be a number of reasons. Steel is a very capital-intensive product to make. Once you get a steel plant in place and it's running, it is perhaps in your economic interest to produce as much as you can with that investment, even if for some of it you're not selling at as high a price as you can.
I'd also point out that dumping is a comparison, fundamentally, between the price it's being sold at in the export market and the price it's being sold at in the producer's own domestic market. It's a comparison of those two things. It's a differential pricing type of situation, so there might be different reasons why companies pursue a strategy where they're selling things at a different price. Obviously if they're selling below cost for a lengthy period of time, that is not sustainable. I'm not sure that companies are in that situation, necessarily, but it's a fairly complex calculation that goes into whether dumping is occurring or not. It is possible that companies can sustain it over a longer term because of the other factors involved in their production.
Conservative
Pierre Poilievre Conservative Carleton, ON
In the case where they're selling at a lower price to foreign markets than they sell in their own market, how does that advantage the company? If it can get a higher price at home and it doesn't have to pay any transportation costs, then why would it sell for a lower price abroad?
Senior Director, Trade Rules, International Trade and Finance Branch, Department of Finance
It depends on what the demand is in their domestic market, for one thing. I think part of the overcapacity that we're seeing in the steel sector is because there's an overshooting of investment in steel production compared with global demand. That is part of it; you're just trying to unload it in whatever form you can to whatever market you can.
Conservative
Pierre Poilievre Conservative Carleton, ON
In the case of export subsidies, again, the country as a whole is losing money on each sale if the price received is lower than the total cost of production, with government subsidies included. What advantage does that confer on a country?
Senior Director, Trade Rules, International Trade and Finance Branch, Department of Finance
Countries may have different strategic reasons for doing that. If they want to increase their global market share in a particular product category, that might be a reason, but I think you'd have to speak with individual governments as to the calculus they're making on that.
Conservative
Pierre Poilievre Conservative Carleton, ON
I think it's relevant to us because we're considering legislation that's supposed to respond to surge pricing and surge supply of a commodity and it's important for us to understand what would motivate surge phenomena, which could be dumping or government subsidization of the losses of its exports. What is the real motivation? What is the real benefit to the exporter from doing that? I've really never had anyone explain that to me.
Maybe one day we'll get someone who can figure out why a country would want to lose money by giving a product to a foreign country at a loss on a large scale.
Liberal
The Chair Liberal Wayne Easter
Since we're kind of having a discussion here, I'll add that I think sometimes it's done to keep their plant running until they figure things will turn around. It happens in the farm sector. You sell at a loss and you keep producing in the hope that things are going to turn around, but they don't necessarily do.
Are we all in, all done?
Okay, thank you very much, folks. We had an interesting and general discussion beyond the bill itself, so we appreciate your appearance before the committee on short notice. Thank you for that.
For committee members' information, I know the clerk is calling all the witnesses that members or parties have presented to him. We're having some difficulty, in that we can't do teleconferencing tomorrow because we don't have a room and it takes 24 hours to arrange it or whatever, but we'll try to work that through. We will meet tomorrow at 3:30 in the afternoon.
With that, the meeting is adjourned.