International Trade Committee on March 23rd, 2017

[Randy Hoback, Conservative, Prince Albert, SK]

It's the actual, true picture of what that piece of steel went through by way of carbon footprint.

I become frustrated when I talk with government trade officials. First of all, government officials say we can absorb it all. I say, wait a minute, that's asking you guys to absorb a lot. When I talk to trade officials and ask whether they can put an environmental tax on at the border to account for this, they say they don't think they can, because that would be a non-tariff trade barrier.

How, then, do we compete?

[David McHattie]

I can answer that question.

In theory you can, but what you need to do is treat your domestic products the same as you treat imports. If we begin measuring what the GHG footprint is of the product we make in Canada, we can begin to ask at the border. Using the same methodology—and the World Steel Association has a methodology that could be helpful—you can begin to measure—

[Randy Hoback, Conservative, Prince Albert, SK]

But then we'd have to use regulations instead of —

[The Chair, Liberal, Mark Eyking]

I'm sorry, Mr. Hoback, to cut you off, but your time is up. Maybe we can get one of your colleagues to finish off your questioning.

We're going to move over to the Liberals now.

Mr. Bratina, you have the floor. Go ahead.

[Bob Bratina, Liberal, Hamilton East—Stoney Creek, ON]

For full disclosure, I started in Dofasco in 1964. I think at least seven members of my family have worked there through the years, so I have a particular affinity for the company.

I'll put this to Sean Donnelly first of all. Can you explain circumvention in understandable terms? What is circumvention? How does it work against the steel industry?

[Sean Donnelly]

Thank you, Bob. I can give you some real-life examples.

Let's take the U.S. by way of example. If they have some import duties on Chinese steel coming in and somehow the steel finds its way through Vietnam, for example—these are just hypothetical situations, of course—into the U.S. and circumvents the Chinese duty, that's an example. This is happening. It's just one mechanism.

Now, it gets even worse with the U.S. now putting up walls around circumvention. If that steel finds it way into Canada, which it can, and then repatriates back to the U.S., we then have issues around Buy America. They're seeing Canada as a route to get back into the U.S. through circumvented steel.

This is something that gets into transformation of steel and what classifies as country of origin, but it's an important aspect, and we're glad it was partially addressed yesterday in the budget.

[Bob Bratina, Liberal, Hamilton East—Stoney Creek, ON]

How long does it take for a problem to be resolved with trade remedies, and is it an ongoing problem?

[David McHattie]

In general, Canada's system works relatively efficiently from beginning to end. The formal process is nine months. We begin working maybe another three months in advance of that.

We can provide you with a list of the roughly seven ways that we see circumvention happening. I'd like to add one other one, which we experience ourselves today. We have a successful finding against China that establishes a normal value, a fair selling price. They're still exporting the product to Canada at that price, yet they are selling at a lower price to the market we're competing against, which is illegal, and somebody is getting a rebate somewhere outside of the system to compensate for that difference. We didn't have a process and we haven't yet—until we implement the budget, so I recommend that we implement it as quickly as possible—whereby we can share the evidence, compel people to testify about how this is happening, and then have a panel of judges make a ruling.

We are thus very happy for the actions taken, because this has a consequential impact on us every day.

[Bob Bratina, Liberal, Hamilton East—Stoney Creek, ON]

Sean, what's the wage range of ArcelorMittal Dofasco employees in Canada, in Hamilton?

[Sean Donnelly]

David and I were just chatting about this earlier, comparing Calgary wages to Hamilton's. All in, wages, pensions, benefits, are in the order of $100,000 Canadian a year for a steel-making job on average.

[Bob Bratina, Liberal, Hamilton East—Stoney Creek, ON]

What we have, then, is the sought-after, middle-class kind of employment. How do you compete with lower-wage jurisdictions, even in North America? How can you pay those kinds of wages and benefits against other operators' costs in different places?

[Sean Donnelly]

Driving efficiency and innovation is a constant battle. As you recall your history with Dofasco, in my 35-year career, when I started we used to make 2.5 million tonnes with 14,000 people. We now make 4.5 million tonnes with 5,000 people. That's how we've done it.

[Bob Bratina, Liberal, Hamilton East—Stoney Creek, ON]

In the advance-manufacturing nature of the company, I remember when the crane pulpits were wide open and guys were sweating away over hot furnaces. Now, when I toured the company a month ago or so, people were sitting in air-conditioned booths looking at screen monitors, so how advanced is this manufacturing?

[Sean Donnelly]

With all due respect to all our employees in all the steel industry, there are some tough jobs out there, but, yes, there's a lot of automation, a lot of innovation in what people are doing. You're right, the people tour our plant and ask where the 5,000 employees are. To give you a sense, out of the 5,000 employees, roughly one-third order of magnitude are maintenance employees, and a lot of those are high-tech, electrical-type technicians working on some of the equipment that ABB supplies to us, key equipment in automation.

[The Chair, Liberal, Mark Eyking]

Your time is up.

We're going to move on to the NDP right now, and Mr. Duvall.

[Scott Duvall, NDP, Hamilton Mountain, ON]

Thank you for coming, gentlemen.

I appreciate the tour, Mr. Donnelly. It was very good. Having been a steelworker for thirty-four and a half years, one thing I was impressed by was the health and safety of your plant, and the cleanliness. It was unbelievable compared to what I used to work in back in the seventies.

We've heard from other witnesses about the dumping of steel and how it's affected their businesses. You can all answer. How has it affected your business? Is it running at full or half capacity because of this dumped steel coming in? Has it created job losses or layoffs? If it were to be fixed to make it fairer, would you be increasing your product, and would you be doing any more hiring?

[Sean Donnelly]

I'll let Dave answer after this, but I think at an industry-wide level, at a North American level, the North American steel industry is operating at about 77% capacity. I'll speak for ArcelorMittal Dofasco; we're operating at 100% capacity.

There are two effects. One is on volume and the ability of those who aren't at capacity to step up to capacity, and the second piece, and where we feel the pinch, is on pricing. When pricing gets deflated due to unfair trade practices, that's where we feel the loss in margin, and the squeeze on margin. That's going to put jobs at risk.

[David McHattie]

I'll say the same thing. When competition is won unfairly by a foreign competitor, we lose volume, so we employ fewer people to operate the plant. We lose price, therefore, we have less profit to reinvest in the facility. Ultimately, year after year, if you have less money to reinvest, you end up with a less productive facility. This is why we take trade cases, so we can restore market conditions so the price is a fair price and we can reinvest and employ more people.

It's been our experience that we have a trade case, we have a positive uptick for a period of time, we rehire people, then it shifts. This is why the government needs to continue to be diligent and continue to improve its trade laws year after year.

[Éric Ducharme]

It's a very good question. Our company in the last six years has been running at not even 50% of capacity, so we could definitely do more with the same infrastructure and get more people into the facility.

I mentioned the Champlain Bridge, which is 25 minutes from our facility; we lost almost half the production of the steel there, so just there we missed a hell of an opportunity. A few years ago, when there was a lot of investment in western Canada, more than 125,000 tonnes of steel that we could have fabricated went out of this market. These are all projects that we've missed, so it could improve; we wish it would.

[Scott Duvall, NDP, Hamilton Mountain, ON]

Another good question we had from other witnesses, in terms of trying to make our trade remedy investigations a little bit stronger and tougher, and with better rules, was about union participation, which the budget yesterday acknowledged. Do you see any problem with the unions coming in and participating, and would having the ability to file complaints, like other countries have, be helpful in doing so?

[David McHattie]

In reality, you need to have the economics—the income statement, the costs, the detailed pricing, the competitive information—in order to file a successful case and to follow it through, so it's very difficult, I believe, for the unions to file a case. However, the actions committed to yesterday, for unions to be able to be a supportive party and to make representations, I think will be helpful. It adds another voice. We speak for our employees, of course, but it almost doubles the same things that we're saying and adds weight to them. We're grateful to see them want to participate.

[The Chair, Liberal, Mark Eyking]

Thank you.

We'll move over to the Liberals now.

Mr. Sheehan, go ahead.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Thank you to the committee for allowing me to participate once again.

To the presenters, thank you. That was all good.

Congratulations to Tenaris on your announcement about the start-up in Calgary. I know what a shot that can be, with your start-up announcement recently in Sault Ste. Marie as well, so congratulations.

Both Bob and Scott asked questions about some of the measures that were in the budget announced yesterday. I'd like to ask about two others that were there, and I'll start with the scoping ruling. I'll ask David McHattie this question.

How can the scoping ruling help the industry, and how is it different from anti-circumvention—similar but different?

[David McHattie]

I'll try to be quick with this. To give you an idea, we won a case against China. Within a couple of years, a trader from another country submitted a request to CBSA for a product, the same one that we won the case against in China. They moved to another country, Indonesia, added small value to it, came to Canada, and asked for what's called an “advance ruling”. This was a confidential decision between those parties, the government and this party that wanted to do it, and we, as the makers of that product in Canada, were never informed. We were given neither the opportunity to participate nor the results of that advance ruling.

A scope ruling is a process that will bring transparency to this so that people who want to, in our view, move outside of a trade finding now need to have their request public and have the evidence, and we as domestic producers, who are employing Canadians, have the opportunity to share the real impact of this, understand the decision, and have it all in a public forum.

For us it's critical. We were even told at the Federal Court—we appealed this to the Federal Court when we found out—that we didn't have any standing to appeal this to the Federal Court because we were not a party to the original decision. This now recognizes that we have appeal rights.

We think this will have a big positive impact on those impacted by unfair trade.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Going to the fourth measure—there are some other smaller measures in there as well—we saw some of your inputs, both the unions and the producers, and heard on this committee about the non-market. China's a non-market, and subsequent countries. Can you explain the particular market situation and how that assists in that kind of situation?