EXCLUSIVE REPORT: Sparks fly in Canada over steely ‘Buy America’ plan
Posted: August 1, 2014
TORONTO — Canadian steel producers and their trucking providers are trying to make heads or tails of what U.S. President Obama’s protectionist ‘Buy American’ proposal means for their industry.
During the U.S. election campaign, Obama’s team assured Canadian officials that various anti-trade comments the president made to union-heavy gatherings in critical swing states like Ohio and Michigan was just political red meat for Democratic faithful.
But Canadian manufacturers and their service providers are once again nervous over the Democrat-controlled House’s Buy America provisions being included in the $825 billion stimulus package, which, if passed, would restrict imports of foreign-made iron and steel.
The provision would effectively ban Canadian steel products and related raw materials from infrastructure projects receiving money from the ‘stimulus’ bill. Foreign products would only be allowed if builders show domestic products drove up the costs of a project by 25 percent or more.
Given a chance to reassure international partners today, Vice President Joe Biden instead defended the provision.
Already ‘out of whack’ the steel hauling sector surely doesn’t need the kind of anti-trade rhetoric emerging in the U.S.
The news left Canadian producers and cross-border haulers wondering just how far the new administration is willing to bend NAFTA in order appease U.S. manufacturers grappling with record job losses and withering consumer demand.
"If these Buy America provisions are applied, they would have a significant and detrimental impact on Canadian businesses exporting to the United States," Jayson Myers, president of the Canadian Manufacturers & Exporters, says in a letter to International Trade Minister Stockwell Day. "Canadian manufacturers and exporters need reassurance that the national treatment provisions of the NAFTA and our other treaties with the U.S. provide a safeguard against the restrictive provisions of proposed U.S. legislation."
In an interview today, Sheila Martin of Stoney Creek, Ont.-based steel hauler, S. Martin Cartage, tells us she’s surprised the new administration would go this far despite the hints Obama sprinkled on the campaign trail last year.
Such a law would definitely be "devastating for most cross-border Canadian carriers" at a time when southbound lanes are already dried up, she tells todaystrucking.com. Payload miles in the steel sector are particularly "out of whack."
"Some days everything goes down and nothing comes back. Next time, it’s the other way around," says Martin, whose fleet does 100 percent cross-border work. "There’s not much you can do. When the steel is ready it has to go."
Still, Martin’s gut tells her it’s unlikely the law will pass — at least not in its present form — considering how intertwined the North American steel industry is.
Claude Robert, whose fleet hauls lots of steel to and from the U.S., is less concerned with ‘Buy American’ than with the stranglehold unions have on some Canadian manufacturers.
Claude Robert, the notoriously outspoken president of Boucherville, Que.’s Robert Transport, is equally optimistic, at least on that front.
Like Martin, he points to the American ownership of Canada’s largest steelmakers, Stelco and Dofasco, (the latter is owned by multinational giant ArcelorMittal, which has a strong presence in the U.S.) and the likelihood their parent companies would lean on Congress to back off from the proposal.
While the rhetoric south of the border isn’t comforting, logistically (and probably legally) it would be very difficult for the U.S. to cut its steel ties with Canada, says Robert, adding that Canada also buys a lot of specialized steel from south of the border.
"I don’t think (Obama) could say anything else because the U.S. steel industry is flat on its ass, to say the truth. But I am not too nervous overall," he tells todaystrucking.com. "I think people have to wait and see a little more of what’s going to happen. The truth is, (companies) in the end will buy whatever it is they need for the best quality and price."
In fact, Robert is less concerned with the protectionist drums Obama is beating than he is with the state of Canadian productivity.
"In the last few years the real problem is that we have never improved our products in terms of efficiencies," says Robert, referring mainly to the lack of concessions by Canadian unions to help manufacturing be more cost competitive.
If approved, there’s little doubt the provision would severely hurt Canadian carriers "caught in the whiplash," says Ontario Trucking Association President David Bradley in an email. And although it’s easy to "chalk it up to the usual domestic-oriented rhetoric you get in the House of Representatives," he does add that it’s disconcerting that the bill is being taken as seriously as it is by legislators and "the vice president did not say more to calm the U.S.’s major trading partners."
"However," he adds, "I am sure still room for negotiation and horse-trading. But Canada must act quickly and effectively. We should be under no illusions that Canada is on the political radar screen in Washington. It’s not.
"In a perverse way, Obama’s visit to Ottawa next month could not be better timed."