Politics·Analysis

Bill Morneau's hasty bill to protect the steel industry carries risks

The broad political support greasing the wheels of C-101, Finance Minister Bill Morneau's new legislation to change Canada's trade safeguard rules, may obscure the calculated risk the Liberal government is taking with its strategy to protect the steel industry.

Opposition poised to support legislation that suspends Canada's WTO commitment

Finance Minister Bill Morneau introduced a Ways and Means motion Monday, kickstarting a push to pass changes to Canada's international trade rules before the House rises for the summer and then dissolves for October's general election. (Justin Tang/Canadian Press)

The broad political support greasing the wheels of C-101, Finance Minister Bill Morneau's new legislation to change Canada's trade safeguard rules, may obscure the calculated risk the Liberal government is taking with its strategy to protect the steel industry.

Despite the long list of other bills awaiting passage before this Parliament dissolves — including last week's hot item, the new NAFTA's implementation bill — legislation to amend Canada's Customs Tariff and Canadian International Trade Tribunal (CITT) Acts leapfrogged other priorities for its first day of debate Thursday.

"It gives us the ability, should we need it, to put in place a safeguard with a shorter timeframe than we were previously allowed to do," Morneau said Monday.

We're meant to notice the "should we need it" part of that statement.

This change doesn't necessarily mean the government will have another go at imposing surtaxes on offshore steel. But it wants the flexibility to slap safeguards on in a hurry, just in case.

"You don't go out and get yourself a shiny new tool, put it in the toolbox and then admire it," said Jesse Goldman, who represents construction companies hurt by the first round of emergency safeguards last fall.

"The temptation to use this, and the pressure that's going to be put on government to use this, is going to be immense," the lawyer said in an interview Wednesday with CBC News Network's Power & Politics.

'My clients often price on long-term fixed-price contracts, so they can't pass on steel price increases to their customers' -Jesse Goldman 9:48

The government took its first kick at this can back in October, when emergency safeguards were applied to seven steel products provisionally for 200 days. The trade tribunal then probed the evidence and found an extension could be justified for only two of the products.

Steelmakers and steelworkers disagreed with that conclusion. They called on Morneau to disregard his own tribunal and keep shielding all seven products. 

He said no. They weren't impressed. They kept lobbying.

'Canada's market will collapse'

So long as the Trump administration's "national security" tariff wall remains, critics warn, offshore steel the Americans are no longer buying has to go somewhere.

"Things are moving [and] changing rapidly every day," Catherine Cobden, the president of the Canadian Steel Producers Association, told Power & Politics Monday.

"Many other countries have taken steps to manage their imports," she said, referring to safeguard actions in places like the European Union. If the government doesn't act, she warned, "Canada's market will collapse."

Prime Minister Justin Trudeau joined steelworkers to celebrate Canada's agreement with the U.S. to lift steel and aluminum tariffs in Sault Ste. Marie, Ont. last month. (Adrian Wyld/Canadian Press)

Current legislation requires the government to wait for two years before re-introducing the protection the industry says it needs: a 25 per cent surtax on shipments from outside North America, imposed only when volumes surge above historical averages.

Identifying true surges is both tricky and controversial, leading to lots of billable hours for trade lawyers.

Conventional trade remedies like anti-dumping and countervailing duties already block other countries from dumping cheap foreign steel into Canada.

Safeguard measures are different. They're a temporary tool, designed to help an industry adjust to new competition when fairly-priced imports are threatening to seriously disrupt a market.

That's what the tribunal investigated thoroughly last winter, finding insufficient evidence of surges or harm. Because Morneau wasn't willing to overrule it, he had to find another way to appease the industry.

The only legal way to reimpose safeguards required a two-year wait. This legislation now rewrites laws to lift that waiting period for two years, dating from the point when this new law comes into force.

But the requirement for this waiting period isn't Canada's to rewrite. It's the World Trade Organization's rule. Canada revised its legislation in 1994 to comply with treaty obligations.

WTO concerns 'under discussion'

Canada has championed the need for other countries (but especially the United States) to respect the international rules-based trading system. Ottawa has hosted an initiative to propose WTO reforms.

But in this case, respecting WTO rules is politically unpalatable.

Ahead of talks Saturday in Japan with other G20 trade ministers, CBC News asked International Trade Diversification Minister Jim Carr whether he's discussed Canada's plans to withdraw from its treaty obligations, at least temporarily, with its trading partners.

"That's all under discussion," he said.

In letters to Opposition Leader Andrew Scheer and NDP Leader Jagmeet Singh asking them to help expedite C-101, Morneau reminded both parties of statements they'd made in support of safeguards to protect steelworkers, appearing to suggest that opposing this bill would make them hypocrites.

In April, after the CITT declined to endorse longer safeguards for all seven steel products, the NDP's Alexandre Boulerice jumped to his feet after a thinly-attended Friday question period to propose a unanimous, all-party motion calling for permanent safeguard measures. A scattering of MPs let it carry on a voice vote.

On Tuesday, Conservatives voted against Morneau's motion to set up this legislation. But it's not clear there's anyone in the House of Commons who hopes to ultimately defeat it.

"We want to, and may, support this bill," Conservative foreign affairs critic Erin O'Toole said as debate kicked off Thursday. He then laid out a litany of problems with the government's strategy and accused it of not inviting opposition MPs to a promised briefing on the bill.

"This is an example of an abandonment of a rules-based approach to trade, and our trading partners and friends around the world notice that," O'Toole said. "The government cannot rush in all of these bills at the end of Parliament because it messed up its trade strategy for four years."

Following Trump's orders?

Sault Ste. Marie, Ont.'s Liberal MP, Terry Sheehan — who also chairs Parliament's all-party steel caucus — recently fired a letter off to his local paper, saying that the steel workers he represents (and, presumably, still wants to represent after October's election) "shouldn't have to wait months and months to feel protected."

Prime Minister Justin Trudeau thanks Algoma steel workers and the people of Sault Ste. Marie for standing strong during the period of American tariffs on Canadian steel. 1:17

NDP trade critic Tracey Ramsey told CBC News "it's ridiculous that we have reached this point," because Morneau should have acted earlier to disregard the tribunal and continue the surtaxes.

"Everyone on the Hill was working hard to get him to change his mind, but they were too fearful of a WTO challenge," she said. "It's not as though we would be out of line with our partners, that also want us to act."

Cobden, representing Canada's steel mills, suggested during her CBC interview that one trading partner in particular is demanding this measure.

Canadian Steel Producers Association President Catherine Cobden talks about the government's new measures for the steel industry. 5:21

"Part of our common understanding with the U.S. is that we all need to take measures to prevent that surge of imports which distort our fairly-traded domestic markets," she said, citing the agreement that saw the U.S. lift its steel and aluminum tariffs on Canada and Mexico — while reserving its right to snap them back if it feels threatened in the future.

Morneau had batted away that suggestion Monday.

"This isn't in any way a part of any deal," Morneau told reporters.

Retaliation may follow

Other countries continue to challenge the Trump administration's tariff protections for steel.  It will be tough for Canada to defend itself internationally if this bill is seen as being directed by Washington.

"The rule of law is not a game of ignore the rules and follow the leader," said lawyer Jim McIlroy, who represented clients opposed to the safeguards at the tribunal hearings.

"We'll engage in the law of the jungle and we'll hope that we're fleet of foot and people won't catch us. The fact that the Trudeau government is only doing this for two years illustrates that they know they will eventually get caught."

"As a middle power, this will not end well for Canada," McIlroy added.

He believes countries won't wait to retaliate, potentially against Canadian agriculture exports.

"It's already attracted significant attention from other WTO members. Three of them, in fact, contacted me this morning," Goldman said, declining to reveal their identities for now but suggesting it won't be long until their concerns are made public.

The "unprecedented" repeal of Canada's obligations, even temporarily, is "clearly offside the WTO," he said.

Goldman suggested Canada may be hoping that by the time any formal complaint is made, the two years will have elapsed and Canada will have reinstated its required waiting period and returned to compliance.

(The ability of WTO members to arbitrate such a dispute is also in jeopardy, unless the U.S. stops blocking new appointments to its appellate body.)

"It may be good short-term political policy. We all know that there's an election coming up in a few months and that smokestacks and hard hats tend to make good photo opportunities," Goldman said. "But these types of trade rule-breaking policies are bad for the Canadian economy.

"Canada's moral high ground after this will be in tatters."

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