Canadian Trade Panel Recommends Reducing Safeguard Tariffs on Steel

(Bloomberg) -- A Canadian trade tribunal is recommending that Prime Minister Justin Trudeau’s government claw back steel tariffs imposed to contain fallout from Donald Trump’s own levies.

In a decision published Wednesday, the Canadian International Trade Tribunal recommended tariff rate quotas on two types of steel -- heavy plate and stainless steel wire -- among seven that the government had already applied provisional levies to. On the five other products, it either found no spike in imports or found that Canadian producers hadn’t been harmed.

The recommendations aren’t binding and apply only to certain countries like China. Those tariffs and quotas addressed by Wednesday’s CITT ruling are separate from the tariffs the U.S. and Canada have applied on each country’s steel -- but Canada is trying to convince the U.S. to end that particular fight by arguing that it’s a tough enforcer of steel dumping into the continent. That complicates the political fallout of Wednesday’s recommendation.

“We are disappointed and concerned with the tribunal’s recommendations,” Catherine Cobden, president of the Canadian Steel Producers Association, said in an emailed statement. The provisional tariffs in October have stabilized the market, she said.

Decision in Weeks

She urged Canadian Finance Minister Bill Morneau to disregard the recommendations and impose final measures on all seven steel products. Otherwise, “the steel industry in Canada is threatened with a loss of jobs, significant community impacts, market share erosion, and growing investment uncertainty,” she said.

Pierre-Olivier Herbert, a spokesman for Morneau, said the government would examine the report. “Our Government is carefully reviewing the CITT’s findings and recommendations before deciding on next steps and will respond in the coming weeks,” he said in an e-mail. “We will continue to work with affected businesses and workers in the steel, aluminum and manufacturing industries, to ensure they have the support they need.”

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Canada applied its own tariff rate quotas last year -- in effect, applying a 25 percent tariff on imports that exceed average recent volumes. It was meant to deter a spike in imports, but only from certain countries. The order exempted the U.S., Chile, Mexico, Israel and other nations, as does Wednesday’s recommendation by the tribunal.

On only one of the seven products did the tribunal recommend a quota and, above that level, a 25 percent tariff: stainless steel wire. For heavy-plate, the panel recommended an above-quota tariff of 20 percent. For both products, the tribunal recommends lowering the tariffs in each of the next two years.

However, the tribunal found that, for some products, the spike simply hasn’t occurred. For three of the seven types of steel products -- hot-rolled sheet, pre-painted steel and wire rod -- the panel found that the products are “not being imported in such increased quantities as to cause or threaten to cause serious injury to the domestic industry.”

For two others -- rebar used in construction, and energy tubular products -- the tribunal found there had been a spike in imports but that those imports “have not caused serious injury, and are not threatening to cause serious injury, to the domestic industry.”

Trump Effect

The U.S. applied 25 percent steel tariffs to several countries, including Canada, last year, and Canada followed with its own retaliatory tariffs. Canada has pledged to eliminate its steel tariffs on the U.S. as soon as the U.S. eliminates its tariffs on Canada; but the Trump administration has been floating the idea of a quota instead, which Canada has rebuffed.

Morneau’s spokesman said the country continues to “work towards the complete repeal of the unjustified U.S. tariffs.” Canada has begun to warn it may not ratify the new continental trade deal if the tariffs remain in place.

Cobden, the steel producers’ representative, warned that clawing back the tariffs could rile the Trump administration. “We see strong expectations from the U.S. government that we will take every action necessary to keep unfair steel out of North America,” she said.

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