Canada to begin consultations on response to Chinese steel imports

Canada will launch a 30-day consultation starting July 2 on potential policy responses to protect Canada’s auto workers and its growing EV industry from what it calls unfair trade practices, and prevent trade diversion resulting from recent action taken by Canadian trading partners.

The federal government says action is necessary to level the playing field for Canadian auto workers and for Canada’s EV industry to compete in domestic, North American and global markets. Action will also guard against unfair competition from a potential surge of Chinese imports resulting from the diversion of Chinese EVs from markets that have recently announced increased trade protections on Chinese EVs, including the United States and the European Union.

“Canada has a proud auto manufacturing history, one that has supported generations of workers, and built communities. As the world moves to reduce pollution and keep our air clean, we have attracted historic investments in building EV manufacturing capacity here in Canada,” said François-Philippe Champagne, minister of innovation, science and industry. “That is why our government is taking concrete action, by launching this consultation, to make sure we continue to strengthen our domestic supply chains and bolster access to critical commodities.”

The consultations will seek views on potential policy responses, including a surtax under section 53 of the Customs Tariff, and possible additional measures such as adjustments to the federal Incentives for Zero-Emission Vehicles (iZEV) program and investment restrictions. The consultations will seek comments on cyber and data security related to protecting Canadians’ privacy and Canada’s national security interests. The government will also consider perspectives on policies driving China’s overcapacity and surging exports of EVs, including labour and environmental standards and unfair and non-market practices.

The Canadian Steel Producers Association (CSPA), however, said in a release that the consultations will not be enough to fix the problem.

“[This] announcement signals that the federal government is now realizing the devastating impact of Chinese excess industrial capacity on domestic jobs and competitiveness in Canada. But as presented, the consultations are insufficient to address the magnitude of the problem” said Catherine Cobden, president and CEO of the CSPA. “As a major player in the automotive supply chain, we urgently call on the government to expand these consultations to include other industry sectors that are at the mercy of intentional actions by China to erode Canada’s competitiveness and that of its allies.”

Canada’s steel industry is a supplier to the North American automotive sector, and the CSPA says excess capacity from China is well documented in the steel sector. Over half the world’s steel capacity resides in China and with a decreased demand on its domestic market, excess steel capacity will further be exacerbated.

The CSPA said it is no surprise the U.S. government targeted Chinese steel on its May 14 Section 301 announcement. Slated to enter into force Aug. 1, an additional 25 per cent tariff will be imposed on Chinese steel products entering the U.S. market. Currently, 750,000 tons of Chinese steel is sold on the U.S. market annually, which is expected to be diverted to other markets, unless protections are enhanced. Even with current trade measures in place, China ranks third in steel exports to Canada.

“With yesterday’s announcement, Canada is recognizing the threat of Chinese overcapacity on electric vehicle production,” said Cobden. “The fact is, for the steel industry, the impacts are already here. We need to stand with the United States and ensure action is taken across the automotive supply chain. We need to act, and we need to act fast.”

As it currently stands, over 60 per cent of all Canadian trade remedy measures addressing steel targets China.

“Our system is ill suited for challenges of this scale” according to Cobden. “We should be looking at a broad and deep imposition of at least a 25 per cent tariff on all melted and poured Chinese steel products entering Canada.”