Thank you very much.
Good afternoon to the honourable members of the committee. Thank you very much for the opportunity to present today on behalf of the Canadian Steel Producers Association.
The CSPA is the national voice of Canada's $14-billion primary steel production industry. Canadian steel producers are integral to the automotive, energy, construction, and other demanding industrial supply chains here in Canada. We seek to work with government and industry partners to advance public policies that enable a globally competitive business environment for our member companies and supply chain stakeholders.
To the committee's fundamental question in undertaking this study—that is, asking whether the Canadian steel industry is able to compete internationally—the answer from our perspective is an unequivocal “yes”. In a fair and free market operating on the basis of commercial principles, the Canadian steel industry can not only compete but also thrive.
Our member companies are innovative advanced manufacturers in Canada, producing the lightweight, high-strength, and high-quality steel and steel products that modern automotive, manufacturing, infrastructure, and energy development applications demand. Our steelworkers are well educated, highly skilled, and trained throughout their career to ensure the highest possible levels of productivity in high-tech constantly evolving workplaces.
From an environmental perspective, for the purposes of producing steel, Canada is a jurisdiction unlike almost any other. We have ready access to raw materials for steelmaking. High-quality iron ore, metallurgical coal, and scrap metal are all sourced close to production. Materials are transported efficiently through Canada's modern rail and marine networks. The bulk of Canadian production facilities derive substantial energy inputs from renewable sources. There is, of course, minimal transportation associated with end markets.
This stands in stark contrast with, for instance, China, which sources iron ore from jurisdictions like Australia and Brazil, coal from jurisdictions like Mongolia, and scrap metal increasingly from North America. The end product is then, of course, transported back to Canada for end use in this jurisdiction. When these factors are considered in the context of steel production, the GHG emission differentials associated with a tonne of steel are significant. Production in Canada for use in Canada implies 1.1 tonnes of GHG emission per tonne of steel, while production in China for use in Canada implies 3.5 tonnes of GHG per tonne of steel produced.
I have not casually chosen China as an example. As the committee members are certainly aware, it is a challenging time for the global steel industry, and Canada is not immune to or sheltered from the truly international challenges facing the sector. Global excess production in steel capacity has now risen to nearly 700 million tonnes, with the People's Republic of China, through a variety of state supports, by itself now maintaining more than 425 million metric tons of that global surplus, which is almost 30 times the size of the entire Canadian steel market. In the face of declining domestic demand, widespread institutional ownership and support for China's steel sector has become the driving force behind an unprecedented disruption in established free market trade in steel.
In June 2016 five leading American steel associations released a report that analyzed each of the 25 largest steel companies in China and detailed the amount and types of government subsidies each company received in recent years. The analysis found that these subsidies and policies have led to tremendous overcapacity, and created a highly fragmented domestic steel sector in China made up of many inefficient and heavily polluting companies.
The report states:
The Chinese government has supported the country’s steel industry primarily through cash grants, equity infusions, government-mandated mergers and acquisitions, preferential loans and directed credit, land use subsidies, subsidies for utilities, raw material price controls, tax policies and benefits, currency policies, and lax enforcement of environmental regulation. The Chinese government maintains a majority share in the top-producing...Chinese steel producers. Domestic steel producers are not competing with private enterprises but with sovereign governments that do not need to use free-market principles to operate.
That last sentence is also key in the Canadian context. While Canadian producers can thrive in an open international marketplace, we cannot compete with the Government of the People's Republic of China. In this context, the maintenance of the ability to initiate section 20 inquiries under SIMA to determine where non-market economy conditions may exist is crucial to the maintenance of trade fairness in Canada.
While we applaud the Government of Canada for appreciating this problem and pressing forward on the development of multinational solutions to the problem of global overcapacity in the steel sector, most recently through Canada's active participation in the global forum on steel excess capacity, we would also caution that international solutions on overcapacity will not be quick in coming. As a result, domestic policy instruments designed to protect Canadian interests require modernization.
In the face of increasingly global trade distortion, other countries, prominently including the United States, have taken concrete domestic actions to defend their markets against present-day threats.
We cannot at this critical juncture in our trade relationship with the U.S. risk becoming a back door for dumped steel into the North American market. It is our sincere hope that as part of budget 2017, the government will move to immediately address issues where calculation of dumping margins do not accurately reflect the amount of dumping in the Canadian market, the need for enhanced and transparent processes available to the government in instances of circumvention, and clarification as regards the type and amount of evidence required to initiate trade cases.
In closing, I would remind the committee that primary steel manufacturers in Canada directly support the livelihoods of over 22,000 middle-class Canadians and an additional 100,000 Canadians whose employment is indirectly supported by our sector.
I would suggest that it is in the government's interest to ensure that our trade remedy framework is modernized to ensure that our domestic procurement and international trade policies reflect the establishment of a Canadian price on carbon and ensure that foreign producers in jurisdictions without similar regimes are not allowed an unfair cost advantage in competing with Canadian producers, and that we maintain Canada's people advantage through programming initiatives that encourage training and lifelong learning through apprenticeships, mentorships, and the continued development of industry-leading products through innovation programming.
I would also suggest that we should maintain our focus on our critical bilateral trade relationship with the United States through co-operation on international efforts to address overcapacity and dumping.
Thank you very much for your time. I am, of course, happy to take any questions that the committee might have.