Editorial Mining has much at stake in trade agreement

The following is an excerpt from “Free Trade and the Mineral Industry in Canada,” a speech recently delivered by Debra P. Steger, a lawyer currently with McCarthy & McCarthy of Toronto.

Security of market access is the primary objective of the Canadian government in the free trade negotiations with the U.S. The prime minister and his chief negotiator, Simon Reisman, have both stated that there will be no agreement unless the U.S. agrees to limit the harassment that the U.S. trade laws now impose on Canadian producers. As we all know, U.S. protectionism is on the increase. Fuelled by a U.S. trade deficit expected to reach about $180 billion this year, many U.S. industries are pressuring their congressmen to introduce new protectionist legislation and are bringing increasing numbers of trade actions against their foreign competitors to obtain import relief. The prospect of reduced access to the U.S. market for Canadian mineral producers is a very serious and immediate concern. The Canadian mineral industry now exports two-thirds of its total output to the U.S. That country therefore is, and will continue to be, our most important customer. If Canadian access should be limited in any sector of the mineral industry, such as uranium or potash, it would have significant repercussions on the Canadian economy as a whole.

In the past few years, we have witnessed many threatened trade actions by U.S. producers against the Canadian mineral industry. U.S. copper producers recently lost a Section 201 action which involved Canadian copper imports. The allegation was that increasing imports from Canada were causing serious injury to the U.S. producers. Fortunately, for Canada, the president refused to grant relief in that case.

With regard to potash, two U.S. producers have launched an anti-dumping case against eight Canadian companies, including the Potash Corp. of Saskatchewan (pcs), alleging that the Canadian companies are selling potash at a lower price in the U.S. market than they are selling it for in Canada. The U.S. producers are alleging, in particular, that the Canadian companies are selling below their costs of production. The U.S. will argue that the Deptartment of Commerce should use a constructed value, based on the U.S. producers’ figures, to determine the Canadian domestic price. If they do not succeed with their anti-dumping petition, the U.S. petitioners have threatened to bring a countervailing duty action based on the allegation that the largest producer, the PCS, is a Crown corporation and therefore must be subsidized by the Saskatchewan government.

Canadian uranium producers have had a great deal of experience in battling U.S. trade restrictions. They are now fighting a legislative initiative introduced by Sen. Domenici of New Mexico which would restrict foreign imports of uranium to 50% of domestic energy requirements. Canadian uranium producers and the Canadian government also are fighting a declaration by a U.S. court, currently under appeal, that the U.S. uranium industry is non-viable under the Atomic Energy Act and that the Deptartment of Energy should take measures immediately to ban all imports of uranium.

In any Canada-U.S. free trade agreement, the key to ensuring market access to the U.S. for Canadian firms is to develop rules that the governments in both countries will follow. As the Macdonald royal commission on the Canadian economy suggested, an agreement is our only real alternative to the threat of escalating U.S. unilateral trade actions and trade restrictions against Canadian products. This negotiated bilateral agreement should contain some mutually acceptable rules concerning tariffs and non-tariff trade restrictions. I would suggest that it contain, specifically, the following: 1) a list of actionable or non-actionable subsidies (the Canadian list should be different from the U.S. list); 2) bi-national determination of some issues to encourage a fast and mutually acceptable resolution to particular trade disputes; 3) the elimination of domestic anti-dumping laws, to be replaced with the current competition and anti-trust laws concerning price discrimination (an alternative would be to eliminate the sales below cost provisions of the current anti-dumping laws in Canada and the U.S.); 4) changes in U.S. procedures concerning anti-dumping and countervailing duty actions; and 5) the abolition of certain sectoral trade restrictive actions (this would have eliminated the copper and shakes-and-shingles actions and possible actions against the Canadian uranium further processing requirement).

I cannot emphasize strongly enough that it is your responsibility to make sure that the federal and provincial governments know and understand the particular concerns and the potential restrictions on market access that your companies face in an unaltered Canada-U.S. trading environment.