August 22, 2023 By Treena Hein
August 22, 2023 – Urgent action—that’s what producers of electrical wire/cable and steel in Canada would like to see from the Government of Canada to create a fair marketplace and support their long-term success.
“For far too long, Canadian companies have been subject to onerous rules and regulations that do not apply to their foreign competitors importing into Canada,” explains Catherine Swift, president of the Coalition of Concerned Manufacturers and Businesses of Canada.
“The steel and aluminum industries are a classic example. These industries work hard and spend significant monies to conform to Canadian environmental regulations and other rules that are not imposed on their foreign competitors.”
Swift notes that the Canadian government currently permits foreign competition, especially from China, from businesses that are “far more polluting” than their Canadian counterparts. “This is ridiculous, as it not only disadvantages the Canadian businesses but creates more global climate damage,” she stresses. “The current Liberal government should be ashamed of their hypocrisy.”
These sentiments are echoed by Shelley Bacon, CEO of Northern Cables (Brockville, Ont.), the country’s largest Canadian-owned electrical cable manufacturer.
“We’ve been watching this closely for quite some time now,” he says. “We’re being put out of business. Aluminum conductors and cable coming here from China are being subsidized because they’re not subject to carbon taxing or duty, and we are being asked to match their prices. The Canadian government is obsessed with penalizing people for carbon use here in Canada but doesn’t subject others to the same treatment.”
Bacon points out that while aluminum manufacture, which requires huge amounts of electricity, is made from hydroelectric power in Canada, Chinese aluminum is made using electricity generated through coal plants.
“When you add the fuel burned from oceanic shipping to that, the footprint of Chinese aluminum is at least four to fives higher than Canadian aluminum,” he says. “And instead of any action to rectify this, we’ve seen the federal government double down on the carbon tax in July; and now we also have product being dumped in the U.S. that’s being dumped in Canada. And there’s no guarantee of quality.”
“We also must ask why domestic companies like us that use hydroelectric power are subject to a carbon tax in the first place,” Bacon continues.
All of Northern Cables’ efforts to bring attention to this issue have failed. “Two years ago we testified at the Finance committee, and no response,” says Bacon. “The Liberal MP for Shawinigan doesn’t care at all […] and that’s the riding where most Canadian aluminum is made. I wrote to Environment Minister Guilbeault this spring, and Catherine McKenna before him, and not even an acknowledgment of the letters.”
The solutions, says Bacon, are simple. Northern Cables and companies like it want the carbon tax removed and proper duties applied.
“We’re also working with about five other companies to create some buzz about the fact that Canadian aluminum and steel is made using renewable energy and not coal and, of course, that it is not shipped across the ocean,” Bacon explains. “We are going to approach building owners, electrical engineers and architects over the next few months. We would like them to specify Canadian aluminum and steel, electrical cable, and so on.”
Tax credits, BCA and more
The Canadian Chamber of Commerce has some other ideas on how to rectify the situation.
Matthew Holmes, senior vice-president, Policy and Government Relations, notes that for Canada to become a global leader in producing sustainable goods, energy and more, the government must implement and sustain investment and production tax credits alongside a trade corridors strategy that fixes the inefficient supply chain.
“The reality is that world markets are going through a major change in how we trade, and who we trade with,” says Holmes. “Some of this grows out of recent events like the illegal war in Ukraine, and some from global initiatives, like the Paris targets for net-zero. Many countries are changing their industrial behaviour and lowering their emissions, but many others are only paying lip service.”
Unfortunately, Holmes continues, this means Canadian producers are paying prices on carbon and facing more restrictive permitting regimes than many of their competitors. “Even though this makes competitors’ products cheaper in the short run, over time, they may no longer have buyers. But it doesn’t happen overnight.”
And while Bacon is seeking recognition for sustainably made Canadian electrical components and steel here at home in the construction sector, Holmes adds that Canada’s low-carbon electrical grid and energy market can also attract foreign investors who recognize that competitive advantage Canadian firms offer on this front, on top of other benefits.
Holmes believes, however, that when it comes to setting up new border controls, Canada needs to be cautious. “Trade barriers go up quickly but they can take generations to take down, even in the face of repeated court rulings against them,” he explains. “Just look at the softwood lumber issue we face with the U.S.”
Having said that, Holmes points out that the Canadian Chamber of Commerce is on the record with Finance Canada calling for border carbon adjustments (BCAs) to be considered.
“In concept, this would be a tariff or limit on carbon-intensive goods that come from countries that don’t face the same carbon costs in their production as our domestic producers,” he says. “Steel and aluminum are great examples. One of the key reasons for doing this is to maintain the competitiveness of our domestic industries while accelerating the global market adoption of low-carbon production methods.”
Holmes admits that for this to be truly effective and not cause harm to our Canadian businesses in the longer term, “we need to make sure it’s done in collaboration with our major trading partners—especially the U.S.”.
He adds that the Canadian Chamber has always stood against dumping and unfair trade practices, “and if this is happening in any way, then the government needs to act immediately, using whatever multilateral tools and unilateral actions it has at its disposal”.
Hope for change?
When contacted for comment, Minister Guilbeault’s office directed the enquiry to International Affairs, which directed the enquiry to Finance Canada. That department provided the following comments:
Canada maintains a strong and effective trade remedy system, which was further strengthened in Budget 2022, that allows for the application of anti-dumping and countervailing duties to address market distortions caused by dumped and subsidized imports. This includes steel and aluminum products. To ensure a levelled global playing field, continued competitiveness, and the protection of our shared environment, the Department of Finance also recently consulted with Canadians on the potential implementation of BCAs. This is in addition to the Government of Canada’s continued active engagement with its key trading partners, given the necessity of a coordinated global approach in guaranteeing that regulations on a price on carbon pollution apply fairly between countries.
Finance Canada reports that as of today, no country is collecting BCAs, but countries in the European Union will have a mechanism for them by 2026. Finance Canada also reports that Canada currently has 37 anti-dumping and countervailing duties measures in force on metal products, including on steel and aluminum products.
Catherine Cobden, president and CEO of the Canadian Steel Producers Association, emphasizes there are two immediate threats to the domestic steel industry’s competitiveness. First, offshore steel imports are growing (doubling their market share over the last decade), with most of that from countries under current anti-dumping orders.
Second, Canadian carbon price increases create cost structures that make it challenging for Canadian steel to be competitive in both the U.S. and Canadian marketplaces.
Like Bacon, Cobden also stresses environmental impact: “When Canada imports offshore steel, we are importing the emissions from these jurisdictions”.
“Canadian steel producers are making some of the greenest steel in the world and are well on their way on the decarbonization journey. The industry provides thousands of jobs to Canadian workers as well as economic prosperity to many communities. Policies are urgently needed that level the playing field with others if we’re going to survive these challenges as we continue to decarbonize.”
Cobden believes procurement policies, trade-sensitive regulatory structures, improved import monitoring, and carbon border measures can all play a role in addressing these threats. “We must stem the import of unfairly traded goods while also generating market demand for our greener goods,” she says. “These policies ensure that those who play by the rules, and are working towards a cleaner future, are the beneficiaries of this decarbonization transition.”
Treena Hein is an award-winning Canadian science, technology and industry business trends writer.
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