Senate enables 'extremely hasty bill' to change trade rules

On the day the Senate rushed through legislation to temporarily suspend one of Canada's international trade obligations citing fears of as-yet-unspecified "surges" Donald Trump sat beside Justin Trudeau and said the current trade situation for North American steel is "very well taken care of."

C-101 cleared the House of Commons thanks toa late-night motion on Wednesday, then sailed throughall stages of debate in the Senate in under an hour Thursday afternoon, with approval by voice votes, after only one speech in favour and one opposed.

The new law deletes, waits two years andthen reinstatesa World Trade Organization ruleCanada signed on to25 years ago, which requires a waiting period of two years between the time a protectivemeasure endsand the re-application of a similar safeguardmeasure on the same product.

"We can't have tremendous shipment of certain products," the U.S. president said Thursday, after CBC Newsasked if the U.S. could impose more tariffs on Canada and Mexico.

Listeners familiar withTrump's fixationscould infer that by "certain products," the president likely meant Chinese steel.

"There won't be, hopefully, transshipping," Trump said, referring to the practice of using one country as a stopover to another to dodge tariffs.

"If there'stransshipping, I'll call Justin and he'll take care of it. And if he doesn't, I'll probably call him a second time. And if he doesn't, we'll have to talk," he said, looking at Trudeau.

"We'llbe fine," Prime Minister Trudeau replied.

"I think the situation is very well taken care of," Trump concluded.

Fears of a 'dealbreaker'

Speaking to reporters later, Trudeau said concerns about "dumping" are shared by both Canadians and Americans. Then, as apparent proof of this concern, he notedthe Senate had just passed C-101 "in record time ... to ensure that the North American market on steel and aluminum remains protected from outside influences."

But the new legislation isn't about dumping remedies duties (extra taxes) applied at the border after one country provesanother country's exports are unfairly cheap.

Canada already has 77 different anti-dumping and countervailing duties in place against 25 different countries including China to combat unfair dumping and subsidization.

C-101 is about emergency safeguards. The WTOallows temporary protection measures, such as the application ofsurtaxes above a certain historical quota, when a domestic market isthreatened by otherwise fairly traded imports.

Without the two-year waiting period, the government hasmore flexibility to respond if any sudden surges of offshore steel are detected.

But it still has to justify its protections before the Canadian International Trade Tribunal a process that did not recommend continuing safeguards onfive steel products earlier this spring. Without this rule change, Canada could not re-instate surtaxes on these products for the next two years.

Here's the fear: Canada's new agreement with the U.S. to liftthe previous 25 per cent steel tariffsis a "snap-back" deal. The Americans can slaptariffs back on "in the event that imports of aluminum or steel products surge meaningfully."

Officials are still negotiating the exact definition of the word "surge." In the meantime, the Canadian government has hustled to give itself more flexibility.

Independent Sen.Frances Lankinsponsored C-101's hasty adoption Thursday. Once Parliament rose for the summer, she told CBC News,it "wouldn't be able to respond in the event of an emergency."

"Canada is not signalling that they are walking away from the general agreement of world trading partners," she said. "But in these exceptional circumstances, we are reserving the right to protect our local industry.

"I was informed that the U.S. did not ask for this directly, but I see the tea leaves as well," Lankin said.

"We know that if there's transshipment, which is what could follow a surge of imports into this country, that could be a dealbreaker for the tariff removal."

'Watching our every move'

When the Commons finance committee reviewed C-101 over June 12-14, chair Wayne Easter thanked participants for coming on "extremely short notice, on an extremely hasty bill."

Officials toldMPshow Canada tried to actin the spring of 2018 to alleviate concerns about transshipment risks, including by changingmarking regulations to better identify the origin of steel.

The U.S. imposed its tariffs anyway.

John Layton, executive director for trade remedies at Global Affairs Canada's North American trade division, saidthat while the U.S. "would notice what we would do," he didn't think American tariff decisions hadanything to do withmeasures Canada takesagainst other countries.

"We never had discussions with the United States about specific concerns they have with transshipments, nor did the U.S. ever ask us to impose measures to address transshipment," he said, adding that he didn't think the emergency surtax Canada applied provisionally to seven kinds of offshore steel last of October "had any impact" on the U.S. deciding to tax Canadian imports.

At first, based on Trump's statements, Canada thought the tariffs were linked to the ongoing renegotiation of the North American Free Trade Agreement (NAFTA),Laytonsaid. "We never discovered what the problem was with transshipment."

Catherine Cobden, president of the Canadian Steel Producers Association, told MPs that so long as the U.S. has a 25 per cent tariff on offshore steel and Canada doesn't, domestic producers are "significantly exposed to high volumes of low-priced steel" and areat "grave risk." She said the government needsthe flexibility to respond because imports "will surge."

"The U.S. is watching our every move. We have to demonstrate that we have the toolsand we will use them," she said.

'It's just a process of elimination, there's nowhere else for the steel to go' | Canadian Steel Producers Association President Catherine Cobden

5 years ago

Duration 5:21

Canadian Steel Producers Association President Catherine Cobden talks about the government's new measures for the steel industry.

Ken Neumann of the United Steelworkers unionsaid that one of the biggest U.S. complaints voiced during recent OECD meetings was that "Canada was not protecting its industry."

"If this bill does not pass," John White of the Canadian Automobile Dealers Association warned, "it would be one other reason for our friends in the south not to ratify [the new NAFTA]."

Only one invited witness, a small businessman affected by rising steel input costs, objected to C-101.

"In the private sector, flexibility translates to volatility, and volatility leads to drastic price swings, which are terrible for planning," said Chad Bunch of Calgary's Bunch Welding Ltd.

Legal to pass, illegal to use?

Liberal MP Peter Fragiskatosasked Layton, the trade official, if C-101 was consistent with Canada's international legal obligations.

Layton told the finance committee that Canada was never obligated to write the WTO's waiting period rule into its domestic law.

"However, if Canada were to impose another measure within the two-year period, because we've removed it from our law, I think other WTO members would have questions about how that is consistent with the obligation in the WTO agreement," he said.

Fragiskatosthen askedthe officialto confirmthat Canada wouldn't be offside with the WTO, or likely to face any complaints.

"I think we will face questions about why we're doing it, but my understanding is that there wouldn't be a WTO dispute launched because of our law," Layton said.

Put another way: C-101is legal to pass, but possibly illegal to use.

The same week MPs reviewed C-101, Canadian officialsin Geneva were meetingwith trading partners who did, in fact, have questions about Canada's new legislation.

Sen.Lankin said officials told her they'reemphasizing C-101'stwo-year sunset clause.

Trade lawyers have warned that other countries won't wait to retaliate againstCanada for pulling back from its obligations.Canada's already beleagured farm exports could be in line for more trouble.

But Lankin said that as far as she's beentold of these discussions, "there were no alarm bells that had gone off."