Imagine if the Trudeau government overrules its own trade tribunal and imposes duties on foreign steel.
Doing so would be politically risky, given all the fuss about cabinet’s involvement in another recent legal matter – the SNC-Lavalin case. And potentially a violation of Canadian and international law.
And yet, meddling in the steel case is exactly what Canadian steel makers say Ottawa should do.
At issue is a 25-per-cent emergency surtax the government imposed last October to prevent the diversion of offshore steel into Canada, after the U.S. introduced tariffs to protect its own market.
Emergency duties, known as safeguards, are legal under Canadian and World Trade Organization laws to prevent import surges. But only under strict conditions. That’s because they are essentially a way to restrict imports of legally traded goods. A key condition is that the surtax can only be applied for a limited time period – in this case, 200 days.
Here’s where it gets tricky. Extending the surtax beyond the 200-day period, which expires May 12, requires a finding by the Canadian International Trade Tribunal (CITT) that the surge of foreign steel will “cause or threaten serious injury” to domestic producers, according to Canadian customs law.
Unfortunately for Canadian steel producers, the tribunal ruled earlier this month that only two out of seven affected steel products actually meet that test – stainless steel wire and heavy plate. After an extensive investigation, the CITT cleared all other imports, including a range of products used in the construction of bridges, buildings, oil and gas pipelines and other infrastructure.
That hasn’t deterred the domestic industry, including steel maker Stelco Holdings Inc. of Hamilton. Producers want Ottawa to ignore the tribunal’s findings and extend the surtax on all seven products for a further three years.
So far, Finance Minister Bill Morneau has declined to say what he intends to do as the May 12 deadline nears.
But speculation is rampant that the government may be looking at bending its own rules, particularly after Prime Minister Justin Trudeau posed for a photo-op as he met with Stelco executive chairman Alan Kestenbaum on Parliament Hill earlier this month. At the meeting, the Stelco executive thanked the Liberal government for being “supportive in every way.”
“Intense lobbying” by the Canadian steel industry is causing uncertainty about how the government will respond, according to lawyers at Osler, which acted for several clients in the steel case, in a recent blog post.
If Ottawa does what steel makers want, the government risks violating its WTO obligations and its own laws, lawyers involved in the case say. And the affected countries could retaliate by putting duties on a wide range of unrelated Canadian exports.
The law “makes it clear that cabinet has no authority to impose definitive safeguards” on the five products cleared by the tribunal, explained Toronto trade lawyer James McIlroy, who represented a foreign steel producer in the case. Doing so would put Ottawa in violation of WTO rules, opening the door for countries to retaliate against Canadian exports of agricultural products, he said.
It would also raise “troubling questions” about the Trudeau government’s respect for the rule of law, Mr. McIlroy pointed out, particularly as Ottawa continues to push its case that U.S. tariffs on Canadian steel and aluminum are illegal.
Catherine Cobden, president of the Canadian Steel Producers, acknowledged she is “not sure” if extending the safeguards on all seven types of steel would be legal or not. But she said the Trump administration’s abusive tariffs on steel from Canada and elsewhere have so dramatically changed the global trade playbook that Ottawa must respond aggressively to protect its own turf.
“We can keep making these nice legal arguments, but the world has changed,” Ms. Cobden said. “It’s 2019.”
The fight in Canada over steel is a microcosm of what’s happening around the world as the reverberations from U.S. President Donald Trump’s get-tough trade policies spread around the world. And steel is only a tiny part of it. The Washington-based Peterson Institute for International Economics estimates that nearly 15 per cent of all U.S. imports are now subject to tariffs, covering hundreds of billions of dollars in goods. More than 7 per cent of Canada’s U.S.-bound exports face some kind of duty.
The United States punishes our exports. So we take it out on South Korea, Colombia and others. These countries hit us back, and so on.
Trade slows. Prices go up. And the global economy gears down.