When the founders of plastic pipe maker Ipex Group of Cos. came to Canada from then-Soviet occupied Estonia in 1949, they started manufacturing hula-hoops. Now they want to avoid getting hooped by cross-border trade restrictions.
“The founders made their first million dollars within three years of coming to Canada, but they figured it might be a fad,” says Veso Sobot, engineer and director of corporate affairs for the Mississauga-headquartered Ipex Management Inc.
“So they straightened out the hoops and started making pipe.” Today, Ipex has 18 plants in Canada and seven in the United States.
“We supply the North American market with pipe for construction,” Mr. Sobot says. Ipex makes thermoplastic pipe used in infrastructure for plumbing in buildings, factories and municipal water systems.
“There’s a lot of opportunity for supplying the infrastructure market in both Canada and the United States, and we’ve been doing so for 67 years,” Mr. Sobot says.
The challenge for Ipex is to ensure its success in an atmosphere of threats to tighten U.S. trade barriers.
At the same time, demand is looking up for plastic pipe.
“Plastic’s performance, cost, and installation advantages will … spur its increasing use over competing pipe materials such as concrete, copper, and steel,” Freedonia Group, an industry market research organization, noted in a 2015 report.
“World demand for plastic pipe is projected to rise 6.7 per cent per annum through 2019 to 19.3 billion metres. Strong construction activity, particularly in the large markets of China and the U.S., will boost demand as plastic pipe sees intensive use in both building and nonbuilding construction applications.”
Both the Canadian government and U.S. President Donald Trump’s administration have pledged to rebuild crumbing infrastructure on both sides of the border. Mr. Trump has pledged to spend as much as $1-trillion (U.S.) to repair his country’s aging infrastructure.
In Canada, Finance Minister Bill Morneau has retreated a bit from sweeping infrastructure plans he suggested last fall, but the 2016 Economic Statement and March 22 federal budget together included $180-billion in infrastructure commitments.
“One of the things about infrastructure [such as pipe] is that it’s buried, and so it has been easy for politicians to neglect it,” Mr. Sobot says. But the time for rebuilding is here, he adds.
“Water mains in both Canada and the United States are deteriorating faster than they’re being replaced.”
As long ago as 2011, a study by Utah State University found that more than 8 per cent of water mains in Canada and the United States were already beyond their useful lives – and this was before revelations of disastrous situations such as that of Flint, Mich., where the city’s water supplies are tainted.
What happens, though, if the Trump administration follows through on its threats to bring in tighter “America First” policies, including a possible border tax that could penalize Canadian exports into the U.S. and a toughly renegotiated North American free-trade agreement?
With its U.S. plants, Ipex should be insulated, but the company and Canada’s infrastructure sector are still concerned, Mr. Sobot says.
Co-production at Ipex’s facilities and suppliers across North America makes it difficult to distinguish between U.S. and Canadian products. It has 425 workers at facilities across the United States and sources 95 per cent of its raw materials from chemical plants in Texas and Louisiana for processing in both countries.
It is hardly the only industry in this situation. Heavy manufacturing, whether in automobiles or infrastructure equipment, is highly integrated across the border.
“We already spend $2- to $3-million annually on U.S. products and steel,” says Ari Burstein, president of Marcon Metalfab Inc. in Delta, B.C. “If not precluded from working in the U.S. Pacific Northwest by Buy America rules, we easily could double our U.S. purchases.”
In 2009, then-president Barack Obama brought in a “Buy American” policy but Canada managed to negotiate exemptions.
“This needs to be done again,” Mr. Sobot says.
Some exemptions have already been granted, most notably the raw materials already purchased in Canada by TransCanada Corp. for construction of the Keystone XL pipeline that was given a green light by the Trump administration.
Canada will need a much wider range of exemptions, industry experts say.
“We do not simply trade goods with each other, we build things together, we innovate together, we compete with the world together,” says Dennis Darby, president and chief executive officer of Canadian Manufacturers and Exporters, which represents these sectors.
In an April 3 letter to federal Infrastructure Minister Amarjeet Sohi, Mr. Darby raised concerns about how the United States appears to be seeking wide latitude to export its manufactured and infrastructure products into Canada and Mexico while restricting imports.
He cited the recent draft letter to the Congress from acting U.S. trade representative Stephen Vaughn. This letter “provides further evidence that the U.S. government’s goal is to expand market access to government procurements in Canada and Mexico, while preserving ‘U.S. law and the administration’s policy on domestic procurement preferences.’
“We urge you and your colleagues to resist the attempt of the U.S. government to further discriminate against Canadian manufacturers in a renegotiated NAFTA,” Mr. Darby said.
Mr. Darby and his organization want Mr. Sohi to stand firm in the face of U.S. threats to bring in an America First trade policy.
“The Canadian government should be firm in its position that if the U.S. wants favourable access to Canadian infrastructure projects, it must exempt Canadian manufacturers from the application of all domestic content preferences,” he says.
If not, Canada will need to use whatever leverage it has in supplying raw materials to U.S. projects, Mr. Dennis says in his letter.
“Certain goods originating from the U.S. should be disqualified from use in federally-funded infrastructure projects, in a manner that is consistent with the unfavourable treatment that Canadian goods are receiving.”
“A company really can’t navigate this. It’s up to governments to negotiate a solution,” Mr. Sobot says.
Editor's Note: TransCanada Corp., not Enbridge, is the Keystone XL pipe maker, as an earlier version of the article stated. This version has been corrected.Report Typo/Error
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