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THE RELATIONSHIP IS MUTUALLY BENEFICIAL
Canadian and U.S. steel producers and workers mutually benefit from an integrated North American market realized by the Canada-U.S. Free Trade Agreement (FTA) in 1989, and the North American Free Trade Agreement (NAFTA) in 1994.
- Between 1988 and 2000, U.S. steel exports to Canada increased by almost 300%, with the value of steel trade growing by more than 600%, from $500 million annually to $3.5 billion annually.
- In the same period, Canadian steel exports to the U.S. increased by more than 65%, with the value of that trade growing from $1.5 billion to over $3.6 billion.
We have been, and continue to be each other's best, most reliable and dependable customers.
- U.S. steel exports to Canada now account for almost 60% of all U.S. steel exports, a significant increase over the level of 33% of all U.S. steel exports less than a decade ago.
- In 2000, Canadian steel exports to the U.S. continue to represent 95% of total Canadian steel exports.
- Steel imports from Canada accounted for 3.7% of the U.S. market, while imports from the U.S. accounted for almost 20% of the Canadian market.
- Canada-U.S. steel trade is roughly in balance.
OPERATING IN AN INTEGRATED MARKET
As a result of the FTA and NAFTA, steel producers in both Canada and the U.S. operate in the same commercial and policy contexts, with similar cost structures, common standards, and product specifications.
- Producers on both sides of the border buy their raw materials from the same suppliers and often share ownership of the same sources of supply.
- There have been increasing transborder investments in steel production and finishing facilities. Many Canadian producers own facilities in the U.S. or participate in joint ventures with U.S. producers (e.g. Dofasco, Co-Steel, IPSCO, Ivaco). Similarly, there are a number of U.S. producers with ownership interests in Canada.
- The same union, the United Steel workers of America, represents steel workers in both countries. In addition, steel producers in both Canada and the U.S. belong to a number of the same industry associations (e.g. American Iron and Steel Institute, Steel Manufacturers Association, American Wire Producers Association). Steel service centres, which handle more than 30% of the steel traded between the two countries, are represented by the same North American Association (Steel Service Centre Institute).
- Steel trade between Canada and the U.S. operates in an uniquely integrated market, generating considerable economic activity and employment in both countries.
A UNIQUE RELATIONSHIP
Canada-U.S. steel trade is unique and different from steel trade with other countries.
- As a result of the 1989 Canada-U.S. FTA, there are no customs duties on steel trade between the two countries.
- A vast majority of U.S.-Canada steel trade consists of truckload shipments of steel products made to order and delivered on a just-in-time basis, rather than large boatload shipments entered for sale at practically any price from other countries.
NORTH AMERICAN INDUSTRIES SHARE THE SAME PROBLEMS
Like steel industries around the world, the North American steel industry has been and continues to experience significant difficulties.
- The global overcapacity in steel, collapsing or still recovering demand in some steel markets, and the continuing emergence of new participants in international steel trade, have all led to a significant surge in low-priced steel imports into many countries, including those in North America.
- Canada and the U.S. share the multilateral objective of reducing worldwide excess capacity in the steel industry and are working together to further this objective multilaterally.
THE BENEFITS THREATENED
Despite the evident benefits of Canada-U.S. steel trade for both countries, this trade is being threatened by a recent finding by the U.S. International Trade Commission, in its Section 201 investigation, that some steel imports from Canada are contributing importantly to serious injury suffered by the U.S. steel industry due to imports.
- The Commission's finding provides the President with the authority to impose restrictions on Canadian imports.
- Such a restriction would significantly disrupt the smooth operations of an integrated market which has been and continues to be a commercial reality that is of such unquestioned benefit to both countries.
THE SOLUTION
It is of crucial importance that the U.S. Administration be made aware of the views of those
- U.S. customers,
- U.S. suppliers,
- U.S. workers, and
- U.S. legislators
who each value the current Canada-U.S. steel relationship, believe the ITC finding to be unwarranted, and hold the relationship too important to be undermined by the Section 201 action.
Trade Remedies Division
Department of Foreign Affairs and International Trade
November 2001
