The federal government is examining new measures to stop China and other countries from dumping cheap steel and aluminum in Canada as a way to skirt recent hefty U.S. tariffs.
A senior government official told The Globe and Mail on Monday that Ottawa is consulting widely with industry executives on the best measures to combat an expected flood of offshore steel and aluminum.
No final decision has been made, but federal actions could include the hiring of more border inspectors or possibly higher tariffs to stop unfair global dumping.
Prime Minister Justin Trudeau acknowledged on Monday that he personally reassured U.S. President Donald Trump last week that Canada won't become a transit station for offshore steel and aluminum into the U.S. market.
Mr. Trudeau spoke by telephone with Mr. Trump on Monday to thank him for the "special consideration extended to Canada" while stressing that the steel and aluminum industries are critical to jobs on both sides of the border, his office said in a statement.
President Trump temporarily exempted Canada and Mexico from new tariffs of 25 per cent on foreign steel and 10 per cent one on aluminum; he imposed those tariffs last week, citing China's dumping of excess product at below market rates as a national-security threat.
Joseph Galimberti, president of the Canadian Steel Producers Association, said Ottawa is being urged to add staff to Global Affairs Canada and hire more inspectors for the Canada Border Services Agency.
He said the government needs to monitor steel imports more closely so that if shipment volumes are rising, it can react quickly to stop Canada from becoming a dumping ground into the U.S. market.
Trade actions against offshore steel initiated by the government and brought to the Canadian International Trade Tribunal would likely carry a greater sense of urgency than those brought by industry, Mr. Galimberti said in an interview.
Mr. Trudeau said his government is working hard to ensure that the exemptions stay in place and took issue with the U.S. President's decision to use the tariffs as a bargaining chip.
Mr. Trump has threatened to expand the steel and aluminum duties to the two countries if there is no progress on meeting U.S. demands in the negotiations on the North American free-trade agreement.
Foreign Affairs Minister Chrystia Freeland is heading to Washington on Tuesday for two days of talks with Commerce Secretary Wilbur Ross and U.S. Trade Representative Robert Lighthizer as well as key congressional leaders. Her office said the talks are focused on pushing the ball forward on the NAFTA talks.
Mr. Trudeau said that the consequences of putting tariffs on steel and aluminum in Canada "would mean pain for workers here in Canada but also job losses and difficulties for workers and their families in the United States," he said. "That is because the level of integration within our two markets is deep, complex and profitable to both of our countries."
Mr. Trudeau argued that Canada − the largest supply list of steel to the United States − is a key American defence ally and noted Canadian steel is used to manufacture U.S. tanks and Canadian aluminum is in America warplanes.
Mr. Trudeau also took Canada's case to U.S. cable channels on Monday with appearances on MSNBC and CNN. He is scheduled to tour steel mills in Hamilton, Sault Ste. Marie and Regina this week.
Executives in the steel-processing sector describe the manner in which countries and importers get around tariffs as being akin to a sheet of paper. If there's a tariff on a piece of paper, turn it into a paper airplane and it's in a different category and no longer subject to a tariff.
So steel-processing centres in Canada could import metal from China or India or other countries subject to the tariff and then sell it to an auto-parts maker or an energy company that turns it into something with a different tariff code.
This form of processing allows it to be stamped "made in Canada" and could avoid the U.S. tariff, which is why the federal enforcement officials will need to identify the country of origin of the original steel, said one industry executive who asked that his name not be used because he is not authorized to speak to the media.