Proceedings of the Standing Senate Committee on
Issue No. 99 - Evidence - June 19, 2019
Wednesday, June 19, 2019
Senate Committee on National Finance met this day at 1:55 p.m. to study the
subject matter of Bill C-101, An Act to amend the Customs Tariff and the
Canadian International Trade Tribunal Act; and, in camera, for the consideration
of a draft report.
Mockler (Chair) in the chair.
The Chair: I welcome you to this meeting of the Standing Senate Committee on National
Finance. My name is Percy Mockler, senator from New Brunswick and chair of this
I wish to welcome
all those who are in the room and all Canadians who are watching us on
television or online.
As a reminder to
those watching, the committee hearings are open to the public and also available
online at sencanada.ca.
At this time, I
would like to ask the senators to introduce themselves.
Senator Klyne: Marty Klyne, Saskatchewan.
Forest: Welcome. Éric Forest from the Gulf region of Quebec.
Pratte: André Pratte from Quebec.
Forest-Niesing: Good afternoon and welcome. Josée Forest-Niesing from
M. Deacon: Marty Deacon, Ontario.
Senator Boehm: Peter Boehm, Ontario.
Neufeld: Richard Neufeld, British Columbia.
Marshall: Elizabeth Marshall, Newfoundland and Labrador.
The Chair: I also want to introduce the clerk of the committee, Gaëtane Lemay, and our
two analysts, Alex Smith and Shaowei Pu, who team up to support the work of our
senators, this afternoon we begin our study of the subject matter of
Bill C-101, An Act to amend the Customs Tariff and Canadian International
Trade Tribunal Act.
is still before the other place, but at yesterday’s Senate sitting, the chamber
gave us the mandate to study its subject matter. We must table our report
tomorrow at the latest.
To the witnesses,
thank you very much for accepting our invitation and being here to explain
Today we have
before us officials from the Department of Finance: Mr. Patrick Halley,
Director General, International Trade Policy Division, International Trade and
We’re also joined
by Michèle Govier, Senior Director, Trade Rules, International Trade Policy
Division, International Trade and Finance, at the Department of Finance
We also welcome
an official from Global Affairs Canada: Mr. John Layton, Executive
Director, Trade Remedies and North America Trade.
will make an opening statement. It will be followed by questions from members of
I have been
informed by the clerk that there will be one presenter, and it’s
the floor is yours.
Halley, Director General, International Trade Policy Division, International
Trade and Finance, Department of Finance Canada: Thank you, Mr. Chair.
I’m pleased to be here to speak about Bill C-101, which amends the Customs
Tariff and the Canadian International Trade Tribunal Act.
the proposed amendments in the bill, we believe that we should mention the
current circumstances that led to the development of the bill.
are trade measures that may be imposed under World Trade Organization rules and
Canadian law, where there’s evidence that an increase in fairly traded imports
has caused or is threatening to cause serious injury to domestic producers.
October 2018, the government imposed provisional safeguards for a period of
200 days on imports of seven steel product categories: heavy plate, concrete
reinforcing bars, energy tubular products, hot-rolled sheets, pre-painted steel,
stainless steel wire, and wire rod. These took the form of tariff-rate quotas
whereby there’s a quantity of imports that can be imported surtax-free into
Canada, and the quantity was reflective of historical levels of imports.
Quantities above that threshold would face a 25 per cent surtax.
with Canadian law, the government also asked the Canadian International Trade
Tribunal, the CITT, to inquire into whether final safeguards that could last for
three years on these products were warranted.
April this year, the CITT issued its finding that final safeguards were
warranted on imports of two product categories: heavy plate and stainless steel
wire. As a result, the provisional safeguards on the remaining five product
categories expired on April 29, 2019.
Tariff currently prevents the reimposition of safeguard measures on products
that were subject to previous safeguards for a period of two years following the
most recent imposition. As such, safeguards may not be imposed on the five
product categories that expired at the end of April. For these products, under
the current law, safeguards cannot be imposed until April 2021.
being proposed in the bill to the Customs Tariff would temporarily remove the
two-year moratorium on the imposition of safeguards for products that were
recently subject to such measures. As well, there are consequential amendments
in the bill that are being proposed to the Canadian International Trade Tribunal
are intended to be temporary, and that’s why they have been structured as
provisions that set out the two-year prohibition on further safeguards that are
in subsections 55(5) and 55(6) of the Customs Tariff would be repealed upon
Royal Assent. There’s a consequential amendment made to the CITT Act to remove
references to those subsections during the repeal period.
Second, the same
provisions that are being repealed would be reinserted two years after Royal
Assent; likewise, similar consequential amendments would have to be made to the
would give the government the flexibility, should the need arise during the
two-year period, to respond quickly and appropriately by imposing safeguards
where there is a substantiated surge of fairly traded imports that are harming
Canadian producers and workers.
for the application of safeguards, as they are provided for under Canadian law,
remain unchanged and still need to be met for any safeguard measures to be put
in place. That will remain unchanged. The only thing being changed is the fact
that you can reimpose safeguards during the two-year period.
our presentation. We’d be happy to take any questions you might have.
The Chair: Thank you, Mr. Halley. We will go to questions.
Marshall: To start, wasn’t there an issue also with regard to aluminum?
Mr. Halley: With respect to the imposition of tariffs on
our exports of aluminum to the United States, that is correct, but there has not
been a surge of imports of aluminum into Canada. Also, no safeguard measures
have been put in place on aluminum imports into Canada.
Marshall: So those imports are okay.
aren’t specific just to the two of the seven categories that are warranted. This
is more like a general amendment, is it not?
Mr. Halley: Correct. It is an amendment that would apply
generally. The most current case is the steel products that we discussed during
the opening statement with respect to those five categories where the
provisional safeguards ended in April and whereby, at this stage, you could
not reimpose any safeguards until April 2021. With this amendment, it would
be possible to do so should the need arise. But at the same time, during that
two-year period, if there are other products for which safeguards are being
investigated and put into place, then the two-year moratorium that would have
been lifted would apply for those product categories as well.
Marshall: Could you tell us about the surtax? Who collected the surtax?
Mr. Halley: The surtax applied only in circumstances where
imported quantities were above the levels that were set. There’s a level of
quantity of steel products that would come in without paying surtaxes, and only
those above that quantity were paying surtaxes. That was collected as part of
the regular process by the Canada Border Services Agency.
importing and assessing surtax if and when they were above those quantities. You
needed a permit to import within the quantity. If you did not have that, then
you needed to pay the surtax.
Marshall: Could you tell us how much surtax was collected?
Mr. Halley: From the moment the safeguards were applied on
October 25, 2018, to April 30, the end of the period, $7.1 million in
surtaxes were imposed.
A bit more than
that was collected, but under trade rules, we were refunding any surtaxes that
would have been paid on the five product categories for which the provisional
safeguards ended in April. These are being treated as refunds, so the $7.1
million is a net result.
Marshall: What happens to the $7.1 million? That’s the net amount. Is that
in the Consolidated Revenue Fund?
Mr. Halley: Correct.
Marshall: Is it just brought into general revenue?
Mr. Halley: Yes, that’s right.
Marshall: So the government has an additional $7.1 million. Thank you.
The Chair: Before our next question, I’d like to introduce Senator Lankin, who has just
joined us. She is the sponsor of the bill.
Pratte: Mr. Halley or Ms. Govier, I’m trying to understand exactly
how this works. The Canadian International Trade Tribunal ruled that, for five
products, the Government of Canada wasn’t allowed to use its safeguard measures.
If the bill is passed, the Canadian International Trade Tribunal will continue
to believe that you can’t impose safeguard measures on these five products,
because I suppose the decision is still valid. Does this mean that, in any
event, you won’t be able to take measures for these five products, despite the
passage of the bill?
Mr. Halley: No. The tribunal’s inquiry was conducted over a
certain period. According to people in the industry, the situation is
particularly fluid in the steel sector, where the markets around the world are
very distorted. So circumstances can change quickly. If the tribunal were to
review the issue, it would be for a period — They would look at a slightly
different activity period where circumstances may have changed.
nothing has changed in terms of the standards for implementing safeguard
measures. It’s simply a matter of seeing whether the situation has changed and
whether the data is different by looking at a different application period.
Pratte: I haven’t read the tribunal’s decision, but apparently there hasn’t
been a flood of foreign products in Canada for those five categories.
Mr. Halley: For two of the five categories, two tests
basically determine whether imports have surged and whether this surge is
causing injury or threatening to cause injury to domestic producers. In two of
the five categories, there was a surge in imports. However, there was no injury
or threat of injury. According to the tribunal, in the other three categories,
there was no increase in imports. So there was no injury or threat of
Pratte: How does this bill align with our WTO requirements? Does it meet
them? Does the WTO authorize this type of moratorium?
Executive Director, Trade Remedies and North America Trade, Global Affairs
Canada: There is no obligation at the WTO to have a moratorium in our
domestic law. Some WTO members have such a moratorium and others do not.
However, if we were to impose new safeguard measures on those five products
within the two years, there would be questions at the WTO about whether the
Canadian measures conform with our obligations.
Pratte: The two-year period, is that a WTO requirement?
Mr. Layton: In the WTO Safeguards Agreement there’s a
requirement to wait two years before imposing a measure on the same product.
Pratte: If we adopt this bill, are we going against the WTO requirement?
Could there be challenges launched to what we’re doing?
Mr. Layton: We’ve had questions from WTO members about the
intent of the legislation. We’ve explained that the legislation is meant to
provide flexibility in case of an emergency, of a surge of injurious imports.
I don’t think
there would be a challenge of a change to our law. I think it would only become
an issue at the WTO if we imposed measures again.
Senator Eaton: How dependent is Canada on imported foreign steel? I understand some regions
are very dependent on it.
Mr. Halley: Michèle can correct me, but I think about
40 per cent of the production in Canada is exported, therefore the
rest of the production of steel stays in the market.
We certainly are
aware that there are regional dynamics in particular products with respect to
the availability of supply.
Senator Eaton: So we’re dependent about 60 per cent on foreign —
Mr. Halley: My recollection is 60 per cent.
Forty per cent of the production in Canada is exported, therefore the
remainder stays in the domestic market.
Senator Eaton: The agreement states:
3. The United
States and Canada will implement effective measures to: . . .
b. Prevent the
transshipment of aluminum and steel made outside of Canada or the United States
to the other country. Canada and the United States will consult together on
the agreement provides that the U.S. can reapply the tariffs in the future if
there’s a surge in imports from Canada to the U.S., but it precludes us from
retaliating except in the affected sector. As an example, we couldn’t put a
tariff on Kentucky bourbon. We’d be very boxed in. Is that true? Is it kind of
Mr. Halley: Yes, that’s correct. If the U.S. reimposed
measures on steel — and I would just note that the surge provision is on a
product-by-product basis, so they wouldn’t impose it on all steel but on one
particular steel product if it’s determined that there has been a surge. And we
can impose our own surge measures on U.S. steel.
If we wanted to
impose countermeasures, it could only be on steel, or in the case of aluminum,
it would be aluminum or aluminum-containing products. It’s correct that we
couldn’t impose it on other products outside of the sector.
Senator Eaton: Thank you.
Forest: First, for the sake of clarity, what’s the difference between
safeguard measures and anti-dumping measures?
Mr. Halley: Anti-dumping measures are in place to protect a
market from unfair trade. So when dumping occurs — Dumping means selling
products in the Canadian market at a lower price than in a domestic market or
below the cost of production. So we’re talking about unfair trade.
measures involve imports that don’t create an imbalance. We aren’t talking about
unfair trade, because this trade is completely fair. However, there are just too
many imports. The safeguard measures give domestic producers some protection to
adjust to the increasing flow of imports. This gives them the chance to adapt
over a transition period.
Govier, Senior Director, Trade Rules, International Trade Policy Division,
International Trade and Finance, Department of Finance Canada: Dumping is
also more targeted. It can focus on a specific country or exporter. However,
safeguards apply to imports from all countries.
Forest: Is the same critical path followed to adopt those safeguards?
Ms. Govier: It is different. For dumping, an analysis must
be done and the following questions asked: did dumping take place, and does it
cause problems for domestic producers?
The situation is
different with safeguards, as it is a matter of future import levels. In
addition, there are standards to determine whether injury has been caused or
not, and those standards are a bit higher for safeguards.
Forest: Have you seen any reactions or comments from our partners on the
two-year moratorium being eliminated?
Mr. Layton: We’ve had questions from some of our trading
partners about the intent of this legislation. Last week was Canada’s trade
policy review at the World Trade Organization where generally countries were
very pleased with Canada’s trade policy and commitment to the rules-based
trading system, but there were questions about the intent. Of course, we told
them that the intent of the legislation is to provide flexibility in the case of
an emergency situation with the steel surge.
Forest: So the bill does not cause clashes or reactions that could fuel
trade conflicts with our partners?
Mr. Layton: No. At this point there have only been
questions about the intent of the legislation, but there has been no damage to
our relations or no indication of negative reactions from other countries.
Senator Boehm: Thank you for being here. My question is in the direction of Senator
overcapacity issue has been around for a while and has been looked at by various
international bodies. The G20 has spent a lot of time on that, the G7 as well.
There was the Global Steel Forum. And, of course, at the OECD there is a
committee on steel and the work is ongoing.
As we are on the
cusp of summits with the G20 in Japan and in August the G7 in France, to
what extent are you prepared to inform us as to how that discussion is
The second part
to the question is that as countries look at what we’re doing — and
Mr. Layton mentioned the discussions in Geneva at the WTO — other
countries are surely in a similar position in terms of the overcapacity issue,
imports and also transshipments. They all have different regimes regarding how
to deal with this in their laws. But I imagine there’s some fairly active
discussion going on to compare what we are doing and what others might be
Mr. Layton: I can start with the G20. The global forum on
steel overcapacity continues. There was a meeting of that forum in Japan last
month. It’s a topic of discussion for the G20 leaders’ meeting coming up next
weekend. All of the members of the forum, except for one, are intent on
continuing the forum and to continue the discussions to try to tackle the root
causes of steel overcapacity.
China is not
convinced that the forum should continue. It needs to be renewed by G20 leaders.
That issue is being addressed right now in the G20.
concern by other countries about diversion of steel, overcapacity of steel and
imports into their areas. The European Union has a safeguard in place against a
large number of steel products. Russia and some of its customs union members
have steel safeguards in place. The United States, obviously, has its
section 232 tariffs in place against all steel imports except from Canada
and Mexico. There are a number of other countries that have targeted safeguards
on steel products. A lot of countries in the world have already taken action to
try to address the diversion they expect from this overcapacity.
Senator Boehm: As you implied before, the likelihood of someone launching a complaint
against us is pretty low.
Mr. Layton: We’ve had questions from those countries that
have measures in place, but I’m not sure that they would take a case against us
given that they understand the circumstances.
Senator Boehm: Thank you.
Senator Klyne: Thank you for attending this afternoon. I want to ask a question further to
Senator Eaton’s line of questioning.
When it comes to
heavy plate and stainless steel wire, what countries are we predominantly
importing that from, and is it into any particular regions of Canada?
Ms. Govier: Across most product categories, the U.S. is a
major source of imports, and they’re not covered by the safeguards currently in
With respect to
stainless steel wire, the major sources of non-U.S. are India, China, France and
Taiwan. For heavy plate, the major sources of imports are from Turkey, Malaysia,
Germany and South Korea.
In terms of the
regional distribution of where those imports are going, I don’t have that
information. I believe that for those products it is fairly spread out. It has
not been identified to us that there are particular regional issues related to
Senator Klyne: I picked up on the 60-40. How much is produced locally on either one of
those? The numbers you gave were 60-40 for steel generally, or was it for a
particular heavy metal?
Ms. Govier: We would have to check on the specific numbers.
To determine how much of the Canadian market is supplied by Canadian producers,
we also need the figure out how big the Canadian market is, because we know that
a certain amount is supplied by Canadian producers and a certain amount is
imported. We don’t have those ratios in front of us for each of the
Neufeld: Thank you for being here.
Help me out a
bit, because I’m not totally familiar with what we’re talking about. I remember
a year or two ago there was an issue in British Columbia about the cost of rebar
and things that were taking place with the trade and production of rebar. Is
this going to in any way affect Western Canada — I’m talking about British
Columbia — regarding steel products such as rebar, or is this totally
Mr. Halley: I’ll turn it over to Michèle, but the bill only
provides the flexibility should the need arise. There are no measures coming out
of the bill that are immediately being acted upon. It would be based on a
complaint or request from the industry to the government that we look at whether
we can reimpose safeguards, for example. Nothing in the bill leads to that. It
really is a demand-driven process.
On the rebar
question, there’s a history that Michèle can speak to.
Ms. Govier: This issue has come up in previous
investigations into dumping rebar. Those go back a little bit further
historically. Representations were made to the trade tribunal that B.C. should
be excluded from measures. That was not done. There are currently rebar
anti-dumping duties in place that apply throughout Canada.
In the context of
the safeguards that were imposed, stakeholders from British Columbia and other
places as well had concerns about rebar. It’s a heavy product. It’s a relatively
low-value product, so the transportation costs, given the value of the product,
are fairly high. But Canadian rebar producers maintain the position that they
can certainly supply the Canadian market.
So if a request
were to come in for additional safeguards on that product, I believe that issue
would have to be considered.
Neufeld: So it would be the market, then; it would just cost more in British
Columbia than where it’s produced; is that correct?
Ms. Govier: Potentially. As Patrick mentioned earlier, the
form of the safeguard was a tariff-rate quota. So there is a certain amount that
can come in surtax free. That enables historical trade to be reflected.
Importers from British Columbia, if they’re maintaining their historical trade
patterns, may not face significantly increased costs. It’s really just above
that that the surtax would kick in.
Neufeld: Thank you.
Lankin: My colleagues have done a great job in covering a number of items. I
wanted to ask you two questions.
First, could you
clarify the difference between what we would call illegal trade activities, like
dumping, and fair trade activities and protection and the issue of surge?
Perhaps you could go over that again, because in speaking with colleagues,
sometimes “dumping” gets used for “safeguards,” and these are different
Mr. Halley: In terms of dumping or subsidization, these are
considered to be unfair trade practices. The tools available are to put
anti-dumping or countervailing measures to offset the negative effect of
subsidization. Subsidization and dumping are seen as legal or justified trade
measures, so anti-dumping and countervailing measures are there to offset those
effects when they are injurious to domestic producers.
With respect to
safeguards, the concept of safeguards is that there are too many imports. The
imports are not necessarily unfairly traded, there are too many of those. It
does provide for a period of time, up to three years, for domestic producers to
adjust to this new reality, or to try to stem off the increased imports.
It does allow for
a period of adjustment to the new reality that these imports may be increasing,
but they are increasing too fast for producers to be able to adjust to the new
realities. It does provide a bit of breathing room.
Lankin: As I understand it, when we’re talking about surge levels, so above
the traditional levels of imports — and this speaks to Senator Neufeld’s
concerns — we really are looking at provisional safeguards if
circumstances, research, consultation warrant it to be brought in, and it’s the
flexibility to use that.
It’s not just the
excess production capacity in the world; it’s the fact that the largest market,
the U.S., has not used safeguards, surge protection. It has blocked the entire
market to protect the U.S. market. They could change their mind on that and
reimpose on us, and we have no ability within two years to do anything in terms
of a safeguard unless this tool is available to us. Is that basically correct,
or can you elaborate?
Ms. Govier: I think the first part of your question was on
the other standard. It’s not just about a surge, but there also has to be injury
or the threat of injury to a domestic producer; and there has to be a causal
link between the two, because there could be other things potentially affecting
the performance of Canadian steel producers.
That’s really the
analysis the trade tribunal does, and it would be done ahead of any provisional
safeguards being imposed. There has to be evidence that the companies are
hurting as a result of the surge in imports.
On the second
question with respect to the U.S., we need to make a distinction between the
measures against Canada directly versus their measures against everyone else.
Safeguards are intended to address the issue of the U.S. measures against
everyone else, because the steel that would normally be going into the U.S. from
all those other countries could be diverted into Canada. That’s really what’s
trying to be targeted. Regardless of whether we have an agreement with the U.S.
or not, safeguards are still potentially a tool we would want to use.
Lankin: Thank you.
M. Deacon: Thank you for being here. We’re trying to make great
decisions in a short period of time, as I think we can all respect.
I want to focus
on an international and domestic question. You touched on the international
piece through two of my fellow senators. Have other countries found that the
imports of heavy plate and stainless steel wire from certain trading partners
are a threat to their respective domestic industries, such as we’ve been told by
the CITT in its report with respect to Canada?
Ms. Govier: I have a list of the measures that are in place
by other countries. As Mr. Layton mentioned, some are very specific. It
really depends on what those countries themselves produce. Some of them may not
be producers of heavy plate and stainless steel wire because it really is driven
by injury to a domestic industry.
I will flag that
the European Union’s steel safeguard has been in place since January and is
quite broad. It covers 26 categories. I don’t have the list of them. Plate, I
would think, for sure, is covered; I’m not sure about stainless steel wire.
As I look down
the other products covered, I don’t see those two. That’s not to say that they
aren’t being considered. For example, as Mr. Layton mentioned, the Russian
kind of trade union that is looking into safeguards now is looking at
flat-rolled products, which would likely include heavy plate.
So, the problem
products are varied, depending on the country and the circumstances of their
M. Deacon: Help me out with a very basic question. Who are our big
steel producers in Canada? Who are the provinces that really take the lead in
Ms. Govier: The most significant production would be in
Quebec, Ontario, Saskatchewan and Alberta, with downstream production being more
spread out. Those are the primary producers.
M. Deacon: Thank you.
Forest-Niesing: I will provide some context before I ask my question. The
World Trade Organization’s mission is to resolve trade conflicts between
nations. The dispute settlement body, the DSB, is the WTO’s appeal court.
If I understand
correctly, it is mandatory to have three judges at the DSB to handle an appeal.
I also understand that, since spring 2018, the U.S. has been blocking the
renewal of mandates on which World Trade Organization members must agree
unanimously. Given that situation, how do you see an effective implementation of
measures set out in the bill before us today?
Ms. Govier: First off, for clarification, if we were to
move down the road of imposing provisional safeguards, that’s absent anything
that’s going on at the WTO right now with the dispute settlement process. The
process there for provisional safeguards would be that the Minister of Finance
would be responsible for preparing a report that shows the evidence that
safeguards are warranted. Then it’s a decision by the Governor-in-Council and
the matter would go to the Canadian International Trade Tribunal, which is a
domestic tribunal here, to look into what that is.
that there are some significant issues at the dispute settlement body.
Mr. Layton: The problem with the appellate body of the WTO
is that if Canada takes the case against another country or if a country takes a
case against Canada, we can go through a panel stage but there’s no ability to
appeal the decision. Basically, by the end of this year, they won’t be able to
hear any appeal to the WTO unless we can resolve the issue of appointing new
members or reform the dispute-settlement system. There’s a real problem with
completing the dispute-settlement system at the WTO but, as Ms. Govier
said, it’s only for international disputes and not for the domestic process for
Forest-Niesing: Thank you.
The Chair: When Senator Marshall was asking a question on taxes, you said that you were
looking at $7.1 million as of April 30 of this year.
Mr. Halley: The period when the provisional safeguards were
applied was between October 25, 2018, and April 30, 2019.
The Chair: Therefore, can you explain the countermeasures collected against the U.S. at
$1.3 billion? The blues from the other house specify that they have basically
collected $3.1 billion. Can you explain that difference?
Mr. Halley: The $7.1 million is solely with respect to the
safeguards on steel against non-U.S. sources. That’s a separate number from the
countermeasures. The countermeasures were applied as of July 1, 2018,
against certain products from the United States. As of the end of April, $1.3
billion in surtaxes had been collected on imports from the United States. A
certain amount will come from the three-week period in May leading to the
repeal of the countermeasures that the Minister of Finance announced on
May 20. There will be a bit more potentially.
There are always
changes to the accounting by the CBSA based on importers’ accounting. The number
may fluctuate a bit, but, at this stage, from July 1, 2018, to
April 30, 2019, it was $1.3 billion.
The Chair: It was not $3.1 billion?
Mr. Halley: No.
The Chair: With those taxes, then, is there any plan to help companies in Canada that
have been affected by the disruptive trade market between the U.S. and Canada?
Do you have a plan of action to help those companies?
Mr. Halley: A lot of announcements were made and a lot of
measures were put in place to support the companies affected by the dispute with
the United States. They were affected by tariffs in the United States but also
affected by the countermeasures in Canada.
A number of
measures were announced. Some were announced on June 28 or 29 of 2018 in
the context of countermeasures with respect to financing facilities at Export
Development Canada, at the Business Development Bank of Canada. There was some
money as well for the Strategic Innovation Fund out of the Department of
Innovation, Science and Economic Development. There was also support for workers
out of ESDC. A lot of measures were put in place at the time.
measures were announced in the 2018 Fall Economic Statement with respect to the
Strategic Innovation Fund; more money went into that. There was some money for
programs for small- and medium-sized enterprises announced in March of
2019. We can speak a bit more about that because Ms. Govier and I have been
handling a lot of the issues with respect to remission of countermeasures.
countermeasures were imposed against certain products from the United States,
there was a remission process that was ongoing with the department whereby if
the products were not available from domestic supply, then we were waiving or
reimbursing the surtaxes that would be applied. That was also part of the
assistance to companies affected by the situation.
The Chair: Are there any other comments from Ms. Govier?
Ms. Govier: That covers it.
The Chair: My last question to the officials would be this: How much money has been
spent from countervailing duties in Canada since we imposed them?
Mr. Halley: We can get back to the committee with the exact
number. There are a lot of programs. Some of the numbers are more familiar to
us. For example, up to $395 million would have been remitted through the
remission process. We know that because we were handling the remission process.
But in terms of the specifics of each and every support measure, we can get back
to the committee with the exact numbers.
The Chair: Because of the time frame of our pre-study and our report to the Senate of
Canada, can you, Mr. Halley, assure us that within the next few hours you
can provide that information through the clerk?
Mr. Halley: Yes, we will.
Marshall: Thank you, Mr. Chair, for your assistance on that item. I
would be interested in seeing how much the government has paid out to assist
industry because it seems they’ve come in for a bit of a windfall. It would be
nice to know who they’re helping with all that money.
The Library of
Parliament provides research for us when we have hearings. A sentence in the
material they provided to us on this issue states:
Government re-imposed such measures [meaning the measures in this bill], and
that action led Canada’s trading partners to initiate a proceeding under WTO’s
dispute-settlement mechanism, the period of re-imposition could end before the
WTO issues its decision.
I thought that
I was looking at
some articles, and I found one that appears to be on the website of Borden
Ladner Gervais, a law firm with an office here in Ottawa. I don’t think they’re
the authors of the article, but it is headed “If You Don’t Like The Answer, Just
Ignore The Rules: Government Of Canada Intends To Disregard WTO Rules Limiting
Repetitive Use Of Safeguard Measures.” It’s not a very long article, but there’s
a sentence that says that with this legislation:
. . . the
Government is enabling itself to disregard its WTO commitments by reimposing
safeguards on the same steel products for which the CITT, following a
months’-long inquiry that included two weeks of hearings, dozens of witnesses
and over 38,000 had pages of evidence and argument, concluded could not be
justified. This is unprecedented in Canada and likely any other WTO Member.
Then it says:
In the trade
law world, this is known as a “hit and run” measure because as a practical
matter it likely will expire before any challenge to it by trading partners can
run its course through the WTO’s dispute settlement system.
When I read that,
I was a little uneasy about these amendments. Could you speak to the merits of
the portion of that article that I just quoted?
Mr. Halley: The bill does not put safeguards in place. It
does allow the government the flexibility, should the need arise during a
two-year period, to impose safeguards on a product on which a safeguard was
imposed prior to that. There are no safeguards being applied as a result of
this. It does allow for a period of time where, should the need arise, the
government could do so.
Once again, the
criteria to meet to have a safeguard put in place, nothing has been changed
through this bill. There has to be a surge that is causing or threatening harm
to the domestic producers, and evidence is needed to back that. Nothing has
changed in that regard.
The bill allows
for that possibility of reimposing safeguards should the need arise. Once again,
the market is quite fluid. It’s a pretty distorted market with respect to steel.
If we were to look at a different period of time than what the tribunal looked
at in its initial inquiry, it could lead to a different conclusion, but that
would have to be based on the evidence once again.
Marshall: It seems peculiar to me that we have legislation that provides
general rules and we have this specific situation, and we’re now going to amend
the general rules so that this specific situation can dovetail into it in some
Thank you for
Pratte: I want to continue in the same vein as Senator Marshall. As it says
in the article, are we talking about the case of a country that is hampered by
the WTO rule, according to which tariff quotas cannot be reimposed on products
that were already subject to them for two years? Is this a case where a country,
Canada, does not like a rule and puts itself in a position to violate that
Mr. Halley: As I already said, the bill provides
flexibility, if circumstances allow it, to be able to do so to protect Canadian
industry and Canadian workers who could be affected by that unbalanced global
market. That must be clear to be able to support the reimposition. There must be
a surge in imports, and there must be a causal link between that surge and
injury or threat of injury. It would all essentially be caused by the increase
in those imports. This remains unchanged in that respect. It is really a matter
of flexibility in terms of tools the government can use to deal with a fluid
Pratte: Why was a two-year period chosen? Is there a reason why that period
was set at two years?
Mr. Halley: The intention is really for the situation to
abate or be temporary. We recognize that we are adopting safeguards to fight the
consequences of unfair trade. That way, we can benefit from a certain level of
flexibility, even if the flexibility is not necessarily unlimited with regard to
obligations are negotiated in free trade agreements or trade agreements, like
for the WTO, there are expectations with regard to the fact that countries that
are party to those agreements will not take measures against Canadian exports,
which would be completely unfair. It could undermine the concessions Canada made
when it decided to be party to those agreements.
Pratte: Thank you.
Senator Eaton: Would you say this bill is largely preventative in nature, or are we
suffering from dumping right now?
Mr. Halley: There’s a distinction between dumping and
Senator Eaton: Is it needed right this minute, or is this preventative?
Mr. Halley: It does offer the flexibility —
Senator Eaton: So it’s preventative?
Mr. Halley: That’s right, should the circumstances be
there, should the evidence be there that you are no longer constrained by the
two-year moratorium in an effort to prevent those circumstances from injuring
Senator Eaton: We’ve agreed it is preventative. Did I understand you correctly that the
main countries would probably be China, Malaysia — what other
Ms. Govier: The countries I had mentioned earlier were in
respect to the safeguards that are already in place. The five products that
could potentially be in play relate to different countries.
Senator Eaton: What countries are we wary of right now?
Ms. Govier: I won’t read all of them because we would be
listing 20 different countries, but Turkey, Singapore, Vietnam, South Korea,
Senator Eaton: You mention Vietnam and Singapore. Are they not part of the TPP? That won’t
upset our TPP partners?
Ms. Govier: There’s no requirement in the TPP that we would
not be able to impose global safeguards if the conditions warrant. Some of our
trade agreements do have provisions along those lines under certain conditions,
but the TPP does not. Nothing prevents us from doing so. Indeed, those countries
may well impose safeguards that could potentially affect Canada as well. That’s
within their rights.
Senator Eaton: One last question for my own education. When a country, and I’ll use the
term “dumping” because it’s descriptive, or there’s a surge, what happens? The
products are surged from another country into this country, but how do they get
into the United States? Is there a distributor here who deliberately goes to
Vietnam, Malaysia or China and buys them cheap and sends them to the U.S.? How
does that work?
Ms. Govier: We’re not aware that a lot of that activity is
taking place. It is a potential concern of the United States that that kind of
thing could be happening. There might be imports coming into Canada from a
particular country that are destined for the United States.
Senator Eaton: Why would they use us?
Ms. Govier: There could be different logistical reasons.
Transshipment in the sense of going through one country to get to another is not
necessarily a bad thing. It can be a logistical issue.
Senator Eaton: But it’s the same ocean. I’m trying to understand why somebody would send
the steel surplus from China to Vancouver when they could send it directly to
Ms. Govier: There’s a bit of a distinction to be made. If
the intent is to come into the United States as a product of Vietnam, for
example, and they’re not trying to fool anyone that it’s from Vietnam, there’s
nothing wrong with that. It doesn’t matter if it comes through Canada or goes
directly to the U.S. It’s clearly identified as a product of that country, and
the 25 per cent that applies to those products would apply.
If the company is
trying to do something through the back door, where they are importing it from
Vietnam — I don’t want to disparage them, but just as an example — and
they decide to relabel it and pretend it’s Canadian steel without changing it at
all, that is an illegal activity and is something that should be enforced by the
United States if it’s coming in and is not properly labelled.
situation that can occur is a Canadian producer or company importing steel in
order to make it into something else. If they take it and transform it into a
product that then becomes a Canadian product — if you add a certain amount
of value, that happens — that is a legitimate business activity. It happens
understanding those distinctions to see what’s right and what’s wrong.
Senator Klyne: This is turning into one of those things where we need a whiteboard.
have provisional safeguards, but there are two products, the heavy plate and the
stainless steel wire, on which it was deemed that safeguard measures are
warranted. To focus on those two, and you gave the answer before, but what are
the top countries from which we’re importing those that would be impacted?
Ms. Govier: Sorry, the top countries for the —
Senator Klyne: For the heavy plate and the stainless steel wire.
Ms. Govier: For stainless steel wire, India, China, France
and Taiwan were the top sources of imports. Again, this is non-U.S. because the
U.S. tends to be the highest across all categories.
For heavy plate,
it was Turkey, Malaysia, Germany and South Korea.
Senator Klyne: My question is regarding the final safeguard measures on those. Are you
expecting any counter or retaliatory measures from the countries that are
impacted by this? If so, what kind of Canadian exports might be impacted? When I
hear Turkey, I’m thinking of pulse crops or lentils that we package, refine and
export. Are you expecting other retaliatory measures that could impact Canadian
Ms. Govier: I wouldn’t say we’re expecting anything. We
have had conversations with some of our trading partners. There is a
consultative process that occurs at the WTO when safeguard measures are imposed,
so some discussions have taken place and further discussions are intended.
nothing that we’re aware of at the moment in terms of retaliation from any of
those trading partners, but I suppose at this fairly early stage we can’t
rule out if there are serious concerns.
Senator Klyne: A few of those are big importers of Canadian pulse crop products.
Ms. Govier: Yes. I think some of those countries do import
those types of products. Those could potentially be targets, but it’s really up
to the country in question to determine on what basis it would want to
safeguards, you would only retaliate at the end of a WTO process that finds that
Canada has done something wrong in how it has applied safeguards. It is a fairly
far-off potential threat on those ones.
Senator Klyne: Is there a probability that there might be some retaliatory measures?
Ms. Govier: We don’t have any indication at this point
that’s in the offing. No one has threatened or indicated that is something they
are thinking of.
Senator Klyne: They have to decide that it’s warranted.
Ms. Govier: That’s correct. There are conversations
ongoing, so that’s why I can’t rule it out.
Mr. Halley: During the CITT process that led to the
decision on these two, I take it representatives of about 15 countries
participated in the process as well. They were able to make their views known
and bring any arguments to the tribunal that they wished to make at that
Senator Klyne: And that’s taken into consideration when deciding if they are warranted?
Mr. Halley: Correct.
Lankin: I have two questions. I’ll first deal with the broad
section 232 actions of the United States. Then, second, I want to deal with
tariff rate quotas, or TRQs.
With respect to a
number of questions I’ve heard, I feel a need to come back to an examination of
the source of section 232. This national security defence is not a
safeguard that the U.S. has put in place. Safeguards are legal measures. Once
you do it, you’re not supposed to do it for another two years, and we’re saying
we may need to do it again.
section 232, which now, as a result of the negotiated agreement, has been
lifted from Mexico and Canada only, leaves a large barrier in place. The surplus
producers in those countries are looking for a market. They can’t get into the
U.S. without the 25 per cent tariff — the general broad
tariff — so Canada becomes more vulnerable because, on the five products,
we used a safeguard in response to what the U.S. did. Our agreement is that it
has been taken off. Now the two years is, all of sudden, relevant if there is a
surge and world conditions could lead to a surge coming in.
The other thing
is the U.S. said in that agreement that they reserve the right — because
it’s not a safeguard; they’re not under a two-year restriction in terms of their
WTO commitments — to put this back if they see any transshipment.
Can you talk
about how those two things work together? I think that’s what creates the
vulnerability for Canada right now in which we would want to give our government
the flexibility if this bill is passed.
Ms. Govier: The section 232 measure in the United
States was an important part of the context for the government putting the
provisional measures in place initially. Canada is not a frequent user of
safeguards. The last time we applied them was in the 1990s. It clearly reflected
that this was an exceptional situation that required an exceptional
As I had
mentioned earlier, the fact it is still being imposed and the section 232
measures are still in place with respect to virtually all other countries means
this risk is still there. That is part of the reason it’s important to have the
flexibility to be able to reimpose safeguards should the conditions be met for
Lankin: The second question I have is with regard to TRQs. Here we’re
talking in terms of the ability to use safeguards. That’s the kind of protective
measure or safeguard measure that might be used.
As you explained,
there’s a historical norm for imports, and this would only be applied to a surge
above that, which would have to be proven to be harmful to the industry. A
number of tests would have to be met.
From those who
would have concerns, such as importers — and I think this goes back to
Senator Neufeld’s question in terms of regional considerations about B.C.
importers — and end-product users that have a reliance on imports, they
would still have access to the traditional normal levels that they have. One of
the concerns they raised when Canada put the provisional safeguard measures in
place last year was that all of sudden there was a rush to get your share of the
imports, so it was first come, first served.
has moved to address that by putting in a quota process to ensure that those
end-users and importers don’t get beat out by some other bigger group and
there’s fair access.
describe how that measure works? That was a measure to protect those who had
concerns about the imposition of the safeguards last year.
Ms. Govier: Yes, I can speak to that.
safeguard was imposed last year, it was in the form of a tariff rate quota. At
the time, there was not the legal authority to be able to allocate that quota.
It was a first-come/first-served system, which did raise some concerns among
stakeholders. They couldn’t plan their business very well not knowing whether
they could get a permit and therefore whether the surtax would apply or not.
In the context of
the budget implementation act, amendments were made to the Export and Import
Permits Act giving the authority to be able to allocate. If safeguards were to
be imposed again in the form of the tariff rate quota, the government would have
the option of allocating on different bases, but one basis could be related to
historical share of the importers. That would give more predictability for
importers and ultimately end-users in terms of getting the steel that they want
and knowing that it would be surtax-free or not ahead of time.
Lankin: The importers and some end-users and product-users had concerns last
time around. We’ve spoken to the manufacturers and exporters who have said,
basically, that they represent the whole spectrum of the market and there are
concerns on both sides. The steel industry has a legitimate concern as well. So
they have a very balanced approach that these are tools, if necessary, and that
the process and evidence has to drive if it is necessary or not.
discussions our office had with a number of trade lawyers about concerns of the
type in the article Senator Marshall referred to, we found that when pushed
and when talking about this just being surge capacity, people back off because
they may need protection in another way at some point in time.
What have you
heard thus far from any of those stakeholder groups who would naturally want to
have questions and understand what the government’s intention is here? A number
of them are aware of it and we’ve had conversations. I’d like to know what
government has officially heard.
Mr. Halley: We’ve heard concerns with respect to the
potential for the reimposition of safeguards. But also, as Michèle mentioned,
some of the challenges that were being faced during the period where provisional
safeguards applied from October to April will probably be different
this time around. To a certain degree, that might also help alleviate some
concerns of certain companies or certain downstream users and importers.
I think even in
the provisional safeguards we had last year, we were facing some issues that we
were able to address during the course of the provisional safeguard. For
example, there were concerns with respect to goods that were in transit to
Canada prior to the imposition of safeguards because these are offshore products
with a relatively lengthy travel time to Canada, so we fixed that at some
Some of these
lessons learned have been helpful and I think they help alleviate some of the
concerns, not all of them, that importers might have on a forward basis should
we go down this road again.
The Chair: For clarity, I have two questions.
First, how does
the Canadian International Trade Tribunal determine whether safeguard measures
are warranted when it conducts an inquiry?
Second, would the
adoption of Bill C-101 change the manner in which the Canadian
International Trade Tribunal Act conducts its own inquiries?
Mr. Halley: I’ll deal with the second question, which is
easier than the first one.
change for the tribunal. It would be guided by the same criteria, the same
conditions and the same processes that they used before.
With respect to
the first question, Michèle, do you want to speak about that?
Ms. Govier: I can walk through a bit of the CITT process.
Essentially, they contact all interested parties and invite people to identify
themselves as interested parties as part of the proceeding.
If you look at
the report they did last time, quite a range of different stakeholders came
forward, from domestic steel producers to unions, downstream users, importers,
provinces and other governments as well.
submissions from all of these parties to get evidence with respect to whether or
not there’s a surge as well as with respect to what the impact is on domestic
producers to determine whether there’s injury or threat of injury.
They also hold a
public hearing where they can ask questions to different witnesses. They can
test some of the information they have been provided as part of these
submissions, and the different parties can challenge each other on the
assertions being made. It’s quite a comprehensive and transparent process that
allows for a full airing of views.
hearing takes place, the tribunal does its own deliberations and puts together
quite a comprehensive report detailing the evidence that was received and their
findings with respect to those elements.
For the ones
where they did find that final safeguards were warranted, they recommend the
action or the form of remedy to be taken by the government.
The Chair: On behalf of the Standing Senate Committee on National Finance, you have
demonstrated your professionalism. It has been very instructive in dealing with
our pre-study of Bill C-101. We want to say thank you.
senators, we will suspend for two minutes in order to continue in camera.
(The committee continued in camera.)