Trade Compliance

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Canada Argues Against Potential New Measures on Steel Imports

Posted July 06, 2017

As the Trump administration prepares to unveil its report and recommendations stemming from a Section 232 national security investigation into steel imports (and a similar one dealing with aluminum imports), the Trudeau government has been aggressively working behind the scenes to ensure that Canada is excluded from any tariffs, quotas or other restrictions that may soon be implemented.

The probe stems from efforts by the Trump administration to curtail excess global production capacity of steel, particularly in China, and to crack down on the alleged dumping of steel products into the United States by invoking a rarely used law from the Cold War era. In this regard, pursuant to Section 232(b) of the Trade Expansion Act of 1962, President Trump issued a memorandum earlier this year directing Secretary of Commerce Wilbur Ross to investigate the effects of steel imports on national security.

Under the provisions of the Act, if Commerce determines that steel “is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security,” the President is authorized to take actions “to adjust the imports of the article and its derivatives so that such imports will not threaten to impair the national security.”

In addition to imposing punitive tariffs on steel imports, other remedies that could be authorized by the statute might include limiting trade in the subject goods through the use of import quotas, license fees or restrictive trade agreements.

While some experts have suggested the grounds for invoking section 232 are highly “dubious” considering that only “a small fraction of steel is used for defence purposes,” Ottawa has taken a different tack, instead contending that a long history of military defense cooperation between Canada and the United States actually makes Canadian steel imports a valuable asset for U.S. national security.

At a public event last month, Justin Trudeau expressed confidence that Canada would escape any punitive measures arising from the investigation, saying he had told President Trump directly “that Canada has no business being on a list of possible national security concerns” – a notion the prime minister dismissed as being “just silly” in view of the close working relationship between the two nations’ armed forces. 

Even so, with the prospect of the Trump administration taking some form of action now seeming almost certain, the Canadian government today stepped up its public relations effort concerning the issue by releasing a fact sheet through its embassy in Washington detailing how the U.S. actually has a cross-border steel and iron trade surplus with Canada.

Stating that “Canada is the #1 destination for U.S. steel exports,” the document notes that Canada buys $2 billion more iron and steel from the United States than it sells and points to a $542 million cross-border surplus for American steel mill products as evidence of a balance of trade that “clearly favors the U.S.”

The fact sheet goes on to explain the deeply integrated nature of the U.S. and Canadian steel industries and the essential role Canada plays in “binational supply chains for finished and semi-finished products used in the automotive, construction, and energy sectors.” 

The document also alludes to support from the United Steelworkers, a union representing thousands of aluminum workers across Canada and the U.S., which has unequivocally stated that Canadian steel “is not a threat to American national security.”

After oberving that both countries “have a persistent steel trade deficit with the rest of the world” and have “similar anti-dumping and countervailing measures on steel from outside North America,” the document concludes with a unsubtle dig at Washington’s hypocrisy by noting that whereas the United States has domestic content requirements for federally-funded projects through its “Buy America” provisions, Canada’s procurement market is “open to U.S. iron and steel.” 

Related Documents:

International Trade Commission Steel Imports Report (March 2017)

A Steely Look at Steel (Congressional Research Service)