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Canada’s trading partners push back on steel safeguards

Canada’s trading partners push back on steel safeguards
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Several of Canada’s international trading partners are pushing back against Ottawa’s safeguards on imported steel, challenging the basis for the emergency restrictions and in some cases, requesting individual exemptions.

Turkey, Russia, the United Arab Emirates, the European Commission and Brazil have all filed documents with the Canadian International Trade Tribunal (CITT) stating concerns about the provisional global tariffs and quotas imposed by Finance Minister Bill Morneau in October.

The CITT — a quasi judicial body — is currently evaluating whether those temporary measures should be made “final” — a move that would extend their lifespan from a maximum of 200 days to up to three years. It began hearing arguments from stakeholders this week in Ottawa.

The federal government says the safeguards are necessary to prevent a damaging flood of steel from being diverted to Canada as a result of U.S. tariffs. A rise in imports has already occurred in sufficient quantities to cause or threaten to cause injury to domestic firms, Canada says.

But in a submission to the CITT, the European Commission argues that the “vast majority” of critical data proving this has been withheld from trading partners.

“In the present case a lot of information, in particular relating to imports and the economic indicators of the domestic industry, is kept confidential, which makes it completely impossible for the parties to understand the real picture of the situation, which is subject to the Tribunal’s injury assessment,” states the EC, which co-ordinates trade policy for the European Union’s 28 member states.

In its notification to the WTO’s Committee on Safeguards in October, Canada said that overall, imports of the seven steel products protected by safeguards rose to 2.87 million tonnes in 2017, from 2.74 million tonnes in 2015 — a 5 per cent increase. It also identified “more recent, significant and sharp” increases in the first quarter of 2018, when overall imports of the products spiked 30 per cent compared to the same period a year earlier.

“Both the increased import quantities and price effects of imported products have had a direct impact on domestic producers’ market share, domestic prices and overall profitability,” Canada’s notification states.

Morneau’s decision to apply temporary safeguards was based on a confidential report by the Ministry of Finance. It found that a delay in imposing safeguards would cause damage to the domestic industry that was “difficult to repair.” However the small size of the Canadian industry made it “impossible” to disclose the detailed figures included in the report without compromising proprietary information, the government said in its WTO notification in October.

In its filing, Russia says the public data that Canada does share fails to show sufficient increases in imports to justify the safeguard measures.

“We consider that the increase in imports on 5 per cent during 3 year period cannot be called either sharp or significant,” it states in its submission to the CITT.

As for the 30 per cent increase in imports in the first quarter of 2018: “this is likely to be a spike,” Russia says. “We are sure that such a short period of time as insufficient for proving that the trend might cause serious injury to the domestic industry.”

Canada also identifies overcapacity in global steel production as a factor behind rising imports — a point that drew objections from Turkey and Brazil. The Global Forum on Steel Excess Capacity, of which Canada is a member, states that the problem has existed since the 1970s, Turkey argues.

“Overcapacity is a major source of concern,” it states. “We believe, however, that this problem will not be solved by protectionist measures and countermeasures, particularly when these are not in conformity with the multilateral trade rules.”

Both Russia and Brazil say their exports can’t be blamed for damaging Canada’s domestic industry. In Russia’s case, imports have been decreasing over the past few years, it says, while Brazil says the range of products it sells to the U.S. is largely different from what it sends to Canada, making diversion unlikely.

Safeguards are politically sensitive because they apply to all countries, and to both fairly and unfairly traded goods. Canada has rarely applied these measures in the past and never ahead of an investigation by the CITT. The current safeguards allow specific exemptions for the United States (already subject to retaliatory tariffs), most products imported from Mexico and for a list of developing countries.

The UAE, Brazil and Turkey say their low level of shipments to Canada combined with their country profiles should entitle them to similar reprieves.
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