Thank you for inviting us to testify before this committee.
My name is Patrick Halley, and I am the Director General of the International Trade Policy Division of the Department of Finance. I am joined by my colleague Michèle Govier, Senior Director of Trade Rules, in the same division.
The Department of Finance is responsible for Canadian import policy and legislation. First is the Customs Tariff, which establishes tariff rates for goods imported into Canada, as well as numerous provisions concerning different import situations, authorities for imposing surtaxes, and authorities for providing relief from payment of duties.
Second is the Special Import Measures Act, which sets out and governs Canada's trade remedy system, concerning anti-dumping and countervailing duties.
Last is the Canadian International Trade Tribunal Act, which establishes the tribunal and its functions, including the conduct of safeguard inquiries.
As such, the department has a primary role in import policy, and works closely with the Canada Border Services Agency, Global Affairs Canada, and many other departments and agencies that are involved in Canada's trade policy.
The department is also closely involved in steel and aluminum matters, from import policy to initiatives with fiscal implications and, more broadly, the impacts that issues facing these industries can have on the Canadian economy.
The imposition of tariffs on steel and aluminum by the U.S. earlier this year has presented important challenges for the affected industries. Before the U.S. extended its tariff measures to Canadian steel and aluminum products, the government announced a number of measures aimed at preventing these tariffs from being imposed.
First, it strengthened Canada's trade enforcement regime. The Department of Finance led on a number of these initiatives, which I will explain shortly.
Second, once the U.S. imposed tariffs on Canadian steel and aluminum, the department played a key role in the government's response. It was through the customs tariff that Canada's countermeasures against U.S. steel, aluminum and other imports were imposed, effective July 1. Related to this, where companies have sought relief from the surtaxes through remission, this is also a process that falls within the department's responsibility.
Finally, the imposition of tariffs by the U.S. on all sources of steel imports has created a problem for our domestic industry. To address this situation, the government recently announced provisional steel safeguards. Again, this falls within the department's responsibility.
I will speak briefly about each of these elements.
Canada has a strong and effective trade enforcement regime. Earlier this year, the government took a number of significant steps to demonstrate that Canada is not and will not be a source of steel and aluminum transshipment into the United States. These measures included announcing important changes to Canada's trade remedy system to address circumvention of duties. This provides greater flexibility to address distorted costs in offshore markets and allows participation by unions in trade remedy investigations.
There was also announcement of significant new funding—$30 million over 5 years—to strengthen trade enforcement. Most of that funding went to the Canada Border Services Agency for its investigative and enforcement activities.
Finally, there were amendments to Canada's origin marking regulations to align Canada's marking regime with that of the U.S. and to support more effective enforcement of country of origin rules in the North American space.
In addition, two trade monitoring committees were established, one for steel and one for aluminum, involving the participation of federal officials, provincial and territorial officials, and industry and unions. These committees have met a number of times and are a useful forum for sharing information on government initiatives, the context in the United States market, trade patterns and developments in each of the industries.
As I mentioned, once the U.S. imposed its steel and aluminum tariffs, and following a consultation period, Canada responded with countermeasures affecting the same value of trade, which was $16.6 billion. These were imposed on U.S. imports into Canada of steel, aluminum and other products.
In imposing these measures, the government was cognizant of the potential impact they might have on downstream users, particularly those in the steel and aluminum sector. Efforts were made not to include products of particular concern, such as those not made in Canada.
However, we recognized that not all of these issues could be addressed at that time, and on July 11 the government announced a framework for considering requests for remission. Remission could be granted through a remission order in a number of instances, such as to address situations of short supply in the domestic market. The relief contemplated here is distinct from the duties relief and duty drawback programs that Doug just explained.
Last Thursday, on October 11, the government announced that it would provide targeted remission from Canadian countermeasures for a number of steel and aluminum products that were determined to be in short supply in Canada. This followed careful review of those requests that were received, discussions with domestic producers concerning supply conditions, and interdepartmental discussion on the proposed relief.
For some products, relief is ongoing, while for other products for which it was determined that the short supply situation might be temporary, the relief has been provided for a six-month period. The department continues to review and assess recent submissions, and the remission order will be amended as needed on an ongoing basis.
Finally, last Thursday as well, the government announced provisional global safeguards on seven steel products. This follows the consultation period that was held last August. Safeguards are exceptional trade measures that address import surges that cause, or threaten to cause, injury to domestic producers.
Trade-restrictive measures taken by other countries—most notably by the United States, but also measures taken in response to the United States by other countries and trading partners, such as the European Union and Mexico—with respect to steel products have caused significant disruption in global steel markets. Exporters who normally sell into those markets are often looking for more open markets, such as Canada. The provisional safeguards that were announced are intended to stabilize the Canadian market and will be in place for 200 days.
In the meantime, the Canadian International Trade Tribunal has been asked to conduct an inquiry to determine whether longer-term safeguards are needed.
The safeguards are in the form of a tariff-rate quota. Imports that are in line with historical levels—that is, 100% of the average volumes over a similar period in the last three years—would face no additional surtax, provided that importers have obtained an import permit. Imports without an import permit, and those that go beyond the established quota limits, will be subject to a 25% surtax.
This safeguard is an important trade enforcement measure to address import surges and resultant injury to domestic producers that have arisen because of exceptional circumstances in the global steel market.
In conclusion, the current steel and aluminum trade context presents significant and complex challenges.
We are aware of the challenges faced by stakeholders in these sectors, ranging from primary producers to smaller businesses across the country that rely on a free flow of inputs for the products they manufacture.
In responding to the current situation, significant efforts have been made to strike an appropriate balance between different viewpoints.
As well, the government continues to work toward the complete repeal as soon as possible of all U.S. steel and aluminum tariffs.
Before concluding, we would like to inform the committee that we have taken note of the follow-up to be done regarding the current status of surtax revenues and expenses with respect to the various forms of assistance that the government has put forward, as we discussed during our presentation with the minister on Tuesday.
We are able to provide the requested information, and we hope to be able to forward it to the committee soon.
This concludes my remarks. We are happy to answer any questions you may have.
