Reform Party Dissenting Opinion on the Report on the
Special Import Measures Act
December 10, 1996
The Reform Party is in agreement with the broad thrust of the report produced by the Liberal members of the Committee. We have no disagreement with the technical analysis, interpretation of the testimony and recommendations. We are particularly pleased with the recommendations which involve a more precise definition of public interest in the consideration of SIMA measures and which urge that proper weight be given to lesser duties and short supply in the deliberations of the CITT.Our main comments concern the political and economic context within which the hearings were held. It is our understanding that the review process was initiated by complaints by the Canadian steel industry which feels that it has been subjected to undue harassment by the US anti-dumping trade legislation and process and that it feels such harassment should be dealt with by the use of similar tactics by the Canadian authorities.
We can understand the frustration of those subjected to such harassment and agree that it damages the welfare of not only the industry involved but also all Canadians. This is so especially if it induces firms to open subsidiaries in the US which otherwise would be located in Canada where production is more efficient on economic grounds. The question is how it can be reduced or stopped. We offer the following in response.
First, Canada is sitting in a glass-house concerning the use of SIMA. According to the statistics supplied by the Department of Finance in response to a request by Herb Grubel, between 1985-95 Canada took 52 actions against US importers while the US took only 29 against Canadian importers. Findings which resulted in either definitive duties or price undertakings number 31 in Canada(55 percent) and 14 in the US (48 percent). Perhaps most telling is the value of imports subject to duty: $258 million for Canadian imports and $192 million for US imports (average annual values). The share of Canada's import subject to such duties was 0.3 percent while it was less than half that at 0.16 percent in the US.
These statistics do not suggest that Canada has a very strong case in complaining about the excessive use of anti-dumping legislation in the United States. This fact, of course is cold comfort to specific Canadian firms and industries which find themselves involved in frequent, costly and protracted litigation with the US authorities.
For policy the main implication of these facts is that in the US we have a large constituency of firms that should be interested in supporting efforts to move towards the complete elimination of all trade remedy legislation in NAFTA. Such efforts have not been productive until now. However, we believe that they should be continued and aimed at mobilizing all commercial and political interests damaged by US actions. The outcry in the US over the higher house-prices resulting from the soft-wood lumber agreement seems to offer the opportunity for an offensive along these lines.
We also note the history of protection and the move towards free trade. The arguments about the need for SIMA protection made by witnesses at the hearings were identical to those heard for literally decades whenever the idea of lower tariffs and quotas was discussed, in Canada as well as the US. In spite of the persuasive arguments made by the proponents of protection in both countries, NAFTA and successive GATT rounds of trade liberalization did take place. The forces of protectionism lost because a number of intellectual, commercial and political forces were favourable at a certain time. The confluence of these forces and their ultimate influence was perceived only very vaguely and surprised many.
We believe that persistence in the pursuit of the goal of ridding NAFTA of anti-dumping and subsidy legislation for intra-regional trade will ultimately bear fruit and we encourage the Government of Canada to continue its efforts in this field.
Second, it is in the power of the Government of Canada to make it easier for Canadian firms to initiate SIMA actions, to make it more difficult and costly for US importers to meet SIMA demands and to get the CITT to find in favour of Canadian firms more often, either through different emphasis in the interpretation of existing rules or new rules.
No one can be certain on the reaction of the US government which such initiatives would elicit. On the one side of the issue we heard witnesses, mainly representing the employers and workers of the steel industry, who were firmly convinced that "making the road as bumpy on this side of the border as it is on the other" would bring US legislators to the bargaining table and ultimately ease their life. We respect the views of these individuals, but are concerned about the risks of such a strategy.
US legislators could just as easily respond to an aggressive Canadian policy by digging in their heels and making life more difficult for Canadian exporters. They could use the same techniques for doing so proposed by those who want Canada to become tougher. Such a US response could be very damaging to a wide range of Canadian exporters. And since we rely so much more on exports than do the Americans, the damage to the entire economy in such a process of escalating SIMA type trade disputes could damage seriously the entire Canadian economy.
Witnesses from the Canadian Departments of Industry, Trade and Revenue who are in frequent contact with US officials through their responsibilities for administering SIMA trade disputes were asked to give their strictly personal views on the likelihood that "getting tough" with the Americans would produce the results expected by the representatives of the steel industry. All of them expressed the judgement that such a policy would probably not succeed and that it carried serious risks for the existing trade relationship.
We share this opinion and urge the government to resist the demand for getting tough measures with the Americans and instead recommend intensification of official and industry efforts to identify downstream users of Canadian imports that are injured by US anti-dumping and subsidy legislation. With the help of these interests US legislators should be lobbied to ease administrative procedures and ultimately remove the offensive legislation on all intra-regional trade of NAFTA.
| Herb Grubel, MP
Reform Party Finance Critic |
Charlie Penson, MP
Reform Party International Trade Critic |