International Trade Committee on Oct. 18th, 2018

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

You were talking about the long-term solution, but let me talk about the short term. In the short term, the government has come up with the program to help the steel industry. Do you appreciate those millions that are made in the short term?

[Barry Zekelman]

Yes and no. It's kind of "thanks for nothing," because the imports are already flooding in here. The safeguards don't do anything except prevent even more from coming in. While I say. “Yes, thank you”, they don't do any good. They're not going to increase my production and they're not going to let me open that plant in Welland, because we've already been inundated. All the safeguards will do is help stop an even further flood of steel.

We've been Boy Scouts here. We need to push back.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

Have you taken the—

[The Chair, Liberal, Mark Eyking]

Mr. Dhaliwal, you are quite over your time there. That ends the first round.

In the second round, we're going to start off with the Liberals again. Mr. Fonseca, you have the floor.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Thank you, Mr. Chair.

Thank you to our witnesses.

I really appreciate your candour, Mr. Zekelman.

I want to ask, in regard to some of the proposals you have put forward, how we can make some changes in terms of a quota type of system. Also, with the LNG project, if that would be successful, would some of the things you've put forward not trigger a WTO challenge?

[Barry Zekelman]

Do you mean a WTO challenge saying that the product has to be made here in Canada? I mean maybe.... I don't know.

By the way, I am probably one of the only people who has gone to the WTO in Geneva and spent time there. I was the first CEO who went there, for two weeks. I lobbied and beat China at the WTO on continuous circular welded pipe that came into the U.S. We beat them in 2008. The imports from China went from 800,000 tonnes a year virtually down to zero, but guess where they went? They went to Thailand, to Vietnam, to Oman, and the UAE. They went everywhere else. That's where China shipped their steel to circumvent the duties. That's how this game works.

When you talk about the WTO, nobody plays by the rules, and the Chinese are the worst offenders. I don't even know why they're in the WTO. They have broken every accession protocol. It's a joke.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

I would like you—

[Barry Zekelman]

Quite frankly, when you ask me about the WTO, I would say, “Who cares?” It's about Canada and the jobs here, and our prosperity.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Listen, I agree with you. One thing that puts us all on the same page is that we see this section 232 measure as unfair and unjust. It's something that we are trying to address and deal with as best we can.

I know we've put in place a number of support services. They may be somewhat archaic, which is what I've heard from you, in terms of where we are today with steel. I heard from Mr. Clark that it's almost just in time, that things are happening very quickly.

You talked about multiple ways that different countries are using to circumvent the rules. How can we clamp down on this a lot better than we are now?

[Barry Zekelman]

Well, you need to give customs a bigger stick and more leeway. As I said, piling was coming in from China. We beat them, and they changed the HST code on imports. It was the same damned product, but they just put a different number on it.

As far as section 232 goes, listen, I know President Trump. I've dined with him several times. I know Robert Lighthizer very well. I know Navarro well. I talk with these people all the time. Section 232 was a tool to get you guys to the table on NAFTA. That's it. Don't think anything else.

You can get out of section 232, and this could be solved—literally, I could do it—this afternoon. All Canada has to do.... The U.S. has agreed to two-way quotas, and this thing is over. How do I know that? I've talked to Mr. Lighthizer myself. This deal could be done this afternoon. It's very easy, and it would be great for both countries.

If you want, I'd be more than happy to make a phone call, but Minister Freeland has to get on board too. We could have this deal done this afternoon.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Well, thank you for your comments.

I'm going to share a little of my time with MP Sheehan. He is from Sault Ste. Marie, and Algoma is in his riding.

[Terry Sheehan]

That's right, and—

[Barry Zekelman]

Algoma is—

[Terry Sheehan]

Sorry, go ahead.

[Barry Zekelman]

Thank you.

Algoma is a great company, and we buy a lot of steel from them. We need them to survive.

[Terry Sheehan]

Yes, absolutely, and we appreciate the support from Atlas.

Algoma Steel is a perfect example of the integrated steel market in North America. They make steel with Canadian steelworkers. They flow it into the supply chains on both sides of the border. They make it with iron ore from various states of the U.S.; the coal comes from the United States. There are about four or six states that rely on Algoma Steel's survival for those people in the transportation networks.

You've tweaked my interest, Barry, and I have some questions.

You mentioned a quota system. We've heard testimony on various quota systems, including Algoma. There are a thousand scenarios around quotas and what a quota could look like. Algoma Steel had suggested a product-based quota, a company-based quota system.

Barry, in your mind, what kind of quota would work for the steel industry or aluminum industry in Canada?

[Barry Zekelman]

You absolutely need a product-based quota. If you just give a country-based quota, it's hard to implement, first, and second, you're going to have to go country by country by country. You just need a product-based quota.

For instance, let's say there are two million tonnes of hot-rolled coil brought into Canada every year. Chop it to a million tonnes. The Canadian industry is more than capable of making that up. Look at the numbers and talk to them. Ask them how much more they could make. Then set the quota at that. Then who cares what country ships it in? It's first come, first served. Do it by quarter so you can only bring in x amount or 30% of the quota per quarter, so you don't flood the market in any one quarter. That's it; it's very simple.

It's the same thing on standard pipe. I could start up that plant again, and companies like Nova Steel could produce more product and make the product here and use Canadian steel. Look at standard pipe. Let's say 250,000 tonnes or 300,000 tonnes are coming in; chop it back to 150,000 tonnes or a 100,000 tonnes, and we'll light those plants up immediately.

It's about a product-specific quota. Cut it there, and it will get produced domestically. We'll be paying Canadian taxes. We'll be employing Canadian workers. We'll be consuming Canadian steel. Those steel mills will never be in trouble again.

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going to move over to Mr. Carrie with the Conservatives. Go ahead, sir.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you both for coming in and being in front of us here today as witnesses.

I'd like to talk to Mr. Zekelman. You mentioned section 232 and how it related to NAFTA. I think that's why so many people were really discouraged when there was no resolution on this tariff thing.

You also brought up a really good point, because this is a long-term problem. We understand that the Americans had an initial strategy for this. I think we've known about it as a country since the G7 of 2017. Apparently the Americans have a strategy, and the target is China. My understanding is that these tariffs were used to stop dumping, to stop diversion. Other countries kind of got ahead of it. I think Australia, Korea, Chile, the EU and Japan have all accepted some type of quota system. They are working with the Americans on this global strategy to stop the long-term problem.

I want to ask you about that. Do you think the American strategy for addressing this in the long term is a good strategy? My understanding is that this is what this quota system is all about. It's what these tariffs they are putting on these countries are all about.

[Barry Zekelman]

That is it, 100%. I have 15 plants in the U.S., and we're booming, booming. I can't hire enough people in every plant. It's been fantastic. We're actually hoping for more as they hit these countries.

Look, with the quota system, what he's trying to do.... China accounts for only about 3% of the direct imports of raw steel coming into the U.S., about 35 million tonnes. On indirect imports, however, products made from steel, it's 55 million tonnes, and China is 27% of that. That's the problem.

[Colin Carrie, Conservative, Oshawa, ON]

Yes.

[Barry Zekelman]

China backdoors it through finished products. We have the same problem with product coming into Canada on fabricated assemblies. We've stopped that. We've put duties on those.

[Colin Carrie, Conservative, Oshawa, ON]

That's where I want to drill down on this. Frankly, we've heard some companies are worried about the quota system. Especially for new entrants, it can really restrict the amount of growth and new investment. For people already on the ground, I can see how that solution would work for them.

It seems that as far as the Americans were concerned, you were either on their team doing this or you were off the team. What discourages me is that we're off the team. Canada is off the team regarding the overall strategy. I think the challenge is where we land.

We had the minister here the other day, and he seemed oblivious, as though it wasn't an urgent issue that needed to be brought forward. I'm wondering if there is a deal on the quota system that will come up around the mid-term elections, because he didn't really seem to be as concerned as the businesses on the ground here. I don't know how that's going to play out. If we do get some type of solution, I think the people will be relieved.

We did take some actions. One of the actions I'll give Minister Morneau credit for was that he put this unique stamp, I think it was in May, on product from Canadian mills. In other words, the Americans were asking for unique stamps so they knew it was actually coming from Canadian mills.

Is that something that you're supportive of? Do you think it's a good idea?

[Barry Zekelman]

It's a country of origin marking. I've been dealing with it for years.

Country of origin markings are a state of mind. It's about whether they want to enforce it or not. I've seen it enforced at the border, and then I've seen them just overlook it.

In terms of a deal, there's absolutely a deal here. You just have to go make it.

I will tell you, and I think Ms. Ramsey will tell you.... I will call it as I see it; I'm not shy. Chrystia Freeland blew it. This deal could have been done months and months ago on NAFTA.

I told her point-blank Mexico was going to negotiate behind her back. She laughed at me. Sure enough, they did.

I know what's going on. I talk to these people. I can tell you right now, as recently as last week, Lighthizer would do a deal. We can get rid of these 232s and just agree to 2017 quotas for both countries and leave it there. We'll be happy.

[Colin Carrie, Conservative, Oshawa, ON]

I hope you're wrong. If we end up with that deal, it means that we could have had it a long time ago. If that's the deal—