Company behind tariffs on Canadian aluminum confronts critics in Canada, U.S.
By James McCarten
September 7, 2020
By James McCarten
(CP) WASHINGTON – Aluminum industry advocates from Canada and the United States shook their heads in dismay Thursday as an emissary for two U.S. producers tried to defend the White House decision to slap fresh national-security tariffs on Canadian metal.
Robert DeFrancesco, a trade lawyer and lobbyist in Washington, D.C., went to bat for Century Aluminum and Magnitude 7 Metals, the two solitary American producers that convinced U.S. trade ambassador Robert Lighthizer and President Donald Trump last month to impose a new 10-per-cent levy on exports from Canada.
In an online forum hosted by the Washington International Trade Association, DeFrancesco insisted – contrary to what Canadian producers, industry experts and the federal Liberal government have all said – that Canadian exports to the U.S. have “surged” in recent months, violating the terms of a May 2019 agreement between the two countries.
“The period of June 2019 to July 2020 saw an average monthly Canadian import volume of unalloyed primary (aluminum) … at substantially higher levels than the average monthly import volume over any other period before the tariffs were imposed,” DeFrancesco said.
He said imports from Canada essentially doubled over the previous 12-month period, an increase that DeFrancesco blamed for a 57 per cent collapse in the price of primary aluminum and the loss of 700 industry jobs in Washington state.
“If no action was taken, the (price of aluminum) would have continued its slide and other smelters would have been forced to shutter.”
Jean Simard, president of the Aluminum Association of Canada, was just as unequivocal.
“Our metal has never been, is not, and never will be a threat to U.S. national security,” Simard countered. “As to the question of surge, there hasn’t been any, there is not and there won’t be – our industry is simply responding to market changes without increasing its capacity.”
When the COVID-19 pandemic hit North America in earnest in March, U.S. automakers all but halted production, instantly ending American demand for the specialized, value-added products and components that Canadian smelters typically make. Smelters, which traffic in liquid metal, can’t simply shut down, so Canadian producers had to act fast.
The solution was to pivot production away from value-added products and towards generic, unwrought metal that could easily be later refined and alloyed into specialty products _ precisely the kind of aluminum that smelters in the U.S. already produce.
“Increases in certain product lines have been accompanied by decreases in others, resulting in a zero-sum game,” said Simard, who described the partnership between U.S. manufacturing expertise and Canada’s abundant hydroelectricity – a key component of the smelting process – as a “match made in heaven.”
“Canada and its aluminum industry are essential contributors to the arsenal of democracy.”
Tom Dobbins, president of the U.S. Aluminum Association, which opposed the tariff decision, cited a raft of data to counter DeFrancesco’s claim of a surge in exports.
Statistics from the U.S. Census Bureau show imports from Canada declined 2.6 per cent from May to June, while official Canadian export data released Thursday shows a 19 per cent decline in exports of primary aluminum during the month of July, Dobbins said. And total U.S. import volumes were five per cent lower during the first six months of 2020 than in the same stretch of 2017, the last full year without tariffs.
“Our nation has long been dependent on imports of significant volumes of primary aluminum that allow the downstream portions of our industry to operate and compete with other competitors around the world,” Dobbins said.
U.S. smelters are only capable of meeting about one-third of domestic demand, he added.
“We’re going to have to import our primary aluminum from somewhere and the alternatives to Canada are Russia, the Middle East and China. I do not have to explain to this audience why, for geopolitical reasons, these are poor alternatives.”
The push for tariffs has prompted questions about whether Glencore Plc, a Swiss producer with a 47 per cent stake in Century, is trying to position itself to sell Russian-made aluminum in the U.S. Glencore is spending $16.3 billion over the next five years on up to 6.9 million tonnes of the metal from Rusal, the second-largest aluminum producer in the world.
Without prompting, DeFrancesco waved off that notion – and noted that Chinese aluminum giant Chinalco owns a 15 per cent stake in U.K.-based Rio Tinto, a subsidiary of which happens to be Canada’s largest aluminum producer.
“There’s this allegation that certain entitles are benefiting,” he said.
“If we’re going to start looking at ownership structures, the largest producer in Canada, its largest shareholder is the largest Chinese state-owned aluminum producer. So how is that not relevant if the ownership structures of everyone else is somehow relevant?”
The latest tariffs, which took effect Aug. 16, prompted a retaliatory barrage of countermeasures against U.S. aluminum products, as well as finished products like golf clubs, washing machines, refrigerators and metal furniture, which take effect Sept. 16.
The controversy has also prompted concern that the Trump administration would reimpose tariffs on Canadian steel exports, but so far that hasn’t come to pass.
“I think it was out of an abundance of caution” that steel producers in Canada, economists and even the federal government were bracing for the possibility of new tariffs in addition to those on aluminum, said Mark Rowlinson, a spokesman for the Canadian division of the United Steelworkers union.
Catherine Cobden, president of the Canadian Steel Producers Association, said steel exports to the U.S. are down by as much as 40 per cent since March, “so there’s no way anyone could assess what’s happening as being a surge.”
That, of course, doesn’t necessarily mean producers would be out of the woods, Rowlinson said.
“The Canadian government correctly is concerned that it’s never entirely clear that they’re dealing with a trade partner that feels particularly constricted by the evidence or facts.”