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Trade Tribunal Slaps Duties on Cheap Foreign Steel

Province attacks ruling, claims it will drive up construction costs.

By Andrew MacLeod 30 Jan 2015 | TheTyee.ca

Andrew MacLeod is The Tyee's Legislative bureau chief in Victoria. Find him on Twitter or reach him here.

British Columbia supports helping to build the national Canadian economy in theory, but apparently not if it means driving up construction costs in B.C. by treating companies in other provinces fairly.

Headed into this week's meeting of Canadian premiers and territorial leaders in Ottawa, B.C. Premier Christy Clark was quoted by The Canadian Press stressing the importance of internal trade: "We should be trading freely between our own provinces. That's the best way, the quickest way to be able to strengthen the national economy."

But those words seem to be at odds with a position the province took this week when it attacked a Canadian International Trade Tribunal ruling aimed at levelling the playing field for manufacturers of steel rebar in Alberta, Ontario and Quebec. Rebar is used to reinforce concrete in construction projects.

The case began last April with a complaint from three steel manufacturing companies -- ArcelorMittal LCNA in Quebec, Gerdau Long Steel North America in Ontario and AltaSteel Ltd. in Alberta -- to the Canada Border Services Agency about cheap or subsidized rebar from China, South Korea and Turkey being dumped in Canada.

Dumping refers to a predatory pricing practice where a good is sold in a foreign market at a price that is either below what it would be in the home market or lower than what it costs to produce.

Construction costs

The CBSA initiated an investigation that led to preliminary duties and an inquiry by the CITT. The tribunal found evidence that the Chinese goods were subsidized at home and that the cheaper rebar from all three countries was being dumped in Canada, threatening to harm the Canadian rebar industry.

"The continued and sustained presence of low-priced subject imports will have a further depressing effect on Canadian production," the tribunal found.

It also found that by making the market for rebar fairer, Canadian producers would have a chance to increase their sales, including in B.C. As a result of the ruling, the CBSA placed anti-dumping duties on the rebar from the three countries and countervailing duties on the rebar from China.

On Jan. 9 the CITT confirmed a duty on the dumped material of up to 41 per cent of the export price, and on Jan. 26 released its reasons for the decision.

But the B.C. government thought differently. It released a statement this week arguing the ruling would drive up the cost of construction in the province.

"The decision fails to understand the realities on the ground in British Columbia," Teresa Wat, the B.C. international trade minister, complained in the Jan. 27 press release. "If allowed to stand, it will increase the costs of construction. We have reviewed our options and together with the Independent Contractors and Businesses Association, we are committed to stand up for B.C. and support competitiveness."

The ICBA estimates rebar accounts for eight per cent of the cost of construction in buildings where it's used. A higher price could lead to increased costs for large construction projects such as the Site C dam or liquefied natural gas plants.

Dumped rebar

The rebar companies that launched the complaint are members of the Canadian Steel Producers Association industry group, which welcomed the CITT ruling.

"What the ruling does is it establishes anti-dumping duties," Ron Watkins, the Ottawa-based president of the CSPA, told The Tyee. "The affect of an anti-dumping duty is to restore market based competition."

The CSPA's Watkins said rebar can still be imported from China, South Korea and Turkey, but that the tariffs are intended to level the playing field for Canadian producers. "It does give Canadian steel an opportunity to compete on a fair basis."

The B.C. government, however, is supporting the ICBA's request for a Public Interest Inquiry seeking a special regional exclusion that would allow rebar into the province without the tariffs. The province argues that shipping rebar by land is costly and that Canadian manufacturers have not been supplying rebar to the province.

Even with the new duties, the ICBA has determined "it will not be cost-effective for the industry to ship rebar across land when ocean access is cheaper," according to the provincial government.

The tariffs will add to the cost of construction, the province's press release says, suggesting the increase could raise the cost of a two-bedroom Vancouver condo by $10,000 and a project like the replacement of the George Massey tunnel by up to $32 million.

Call for inquiry

An inquiry is needed, according to the province, "when there is a public interest that merits the reduction or elimination of duties, such as increased public infrastructure construction costs and/or impacts on investment decisions." Such an inquiry could lead to the reduction or elimination of duties on the import of rebar into the province.

"This issue should be a concern to every British Columbian, as these costs get passed along to consumers and taxpayers," said Wat. "It not only affects commercial construction and public infrastructure projects but our competitiveness as a jurisdiction for investment for major industry projects."

The Tyee asked a spokesperson for B.C.'s international trade ministry to reconcile Clark's statements supporting internal trade with the government's position against Canadian suppliers of rebar.

"This government is intent on being competitive, attracting investment, and breaking down barriers in every market: internally and internationally," minister Wat responded in an emailed statement. "The rebar duties increase construction costs and erect an international trade barrier for a key imported product from China and South Korea."

Shipping by land is costly and Canadian rebar suppliers have been shipping very limited amounts to B.C., she said.

The CSPA's Watkins said the same arguments were made to the tribunal which considered them before its ruling and it's rare that a public interest inquiry succeeds at reversing a decision. "All these arguments were put forward in the hearing."

Watkins declined to comment further on B.C.'s push for a regional exemption, but said, "We'll obviously pay attention."

Canadian rebar manufacturers argued at the CITT hearings that they would be able to sell at a competitive price in B.C. "in the absence of dumped and subsidized goods." Their sales had gone up since provisional duties had been put in place and the cost of shipping rebar from Alberta to B.C. was not prohibitive, they said.

Alberta Premier Jim Prentice has said he won't attend this week's premiers' meeting, but Ontario's Kathleen Wynne and Quebec's Philippe Couillard might want to ask B.C.'s Clark why her government's against a ruling that supports a level playing field for companies from their provinces.  [Tyee]

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