Will the North American Free Trade Agreement renegotiations ever reach fruition? Might the steel and aluminum tariff sideshow finally come to an end? The answer, according to trade insiders at the Canadian Transportation Equipment Association’s (CTEA) annual manufacturers’ technical conference in Toronto in October, is that uncertainty is the only certainty.
This past spring, in the heat of negotiations for a new North American Free Trade Agreement, the U.S. invoked Section 232 of the National Security Act to justify 25 percent tariffs on steel and 10 percent on aluminum. Canada retaliated in July with similar measures and added a modest list of consumer goods to the list.
The fast-brewing trade war led to price spikes and market volatility. Looking to prevent large volumes of relatively cheap U.S.-bound foreign steel from being rerouted northwards, and thus undercutting domestic prices, Canadian primary producers successfully lobbied for federal safeguard mechanisms. In October, the Canadian government announced temporary targeted relief from surtaxes collected on steel, aluminum and certain other imports based on market conditions such as supply shortages.
With this drama as the backdrop, Ottawa-based trade lawyer Wendy Wagner of Gowling WLG, and Candace Sider of Livingston International, a Fort Erie, Ont.-based customs broker, spoke on a panel addressing U.S.-Canada trade issues. Each described uncertainty as the new norm.
Session moderator Don Moore, director of government and industry relations with the Canadian Transportation Equipment Association, Candace Sider of Livingston International, and Wendy Wagner of Gowling WLG take part in a panel discussion on trade at the CTEA’s annual manufacturers’ technical conference.Photo: Saul Chernos
Outside established rules
The use of security legislation “is not a normal or usual way to impose tariffs,” Wagner said. “This is a common theme or pattern that we’ve seen — going outside the established rules.”
Canada’s objective in adding consumer goods was to put political pressure on strategic locations in the U.S., Wagner said, adding that an appeal to the World Trade Organization might help validate Canada’s opposition to the tariffs although the body’s decisions are non-binding. “The most that they can do is actually authorize retaliation by a country that’s affected, which is something we’ve already done,” Wagner said.
Sider, Livingston’s vice-president of regulatory affairs, said the current volatility is unlike anything she’s witnessed in 37 years in the business. “Our world is definitely changing,” she acknowledged.
The Canada Border Services Agency is monitoring imports that are subject to new surtaxes, and all parties to cross-border transactions need to know the rules, properly record transactions and understand documentation such as a product or material’s certificate of origin, Sider said.
“You need to really understand what your supply chain looks like. Global supply chains are not as nimble as we all wish they would be, and oftentimes it’s very difficult to change your routing on very short notice,” she explained.
While the U.S. mid-term elections concluded two weeks after the CTEA conference, with Democrats capturing Congress, Wendy Wagner pointed out that Republicans used to support free trade while Democrats tended to support labor and domestic industry, but seemingly entrenched positions are no longer guaranteed. “We’re in a complete upside-down world. I don’t have a lot of confidence that a change in administration will necessarily alter this current path of managed trade,” Wagner said.
Rise of populism
In a keynote address, Rona Ambrose, who was a cabinet minister in the former Canadian
“Everybody in business is trying to wrestle with how to decipher what information out there actually matters — what is true, what is relevant, or is it just another tweet by the most powerful man in the world.”— Rona Ambrose, former Conservative Party of Canada cabinet minister seen here with Greg Grabinksy, the CTEA’s president and vocational sales manager for Peterbilt Canada
government led by the Conservative Party, portrayed Trump’s election and the rise of populism as “probably some of the most fascinating stuff” she’s seen in politics.
“Whether it’s Brexit, or Donald Trump, or the fact that a 31-year-old is now the new chancellor of Austria, or President Macron in France starting a brand new political party out of nowhere and winning the entire election with a massive majority in a matter of months. Are we going to see that happen (in Canada) with Maxime Bernier’s new People’s Party?”
What’s important, Ambrose said, is to understand why populists are succeeding. “I personally believe, from watching for many years, that it happened because those who are in power frankly abuse the institutions that all of us have a lot of trust in. The rise of Trump is just a reflection of that.”
Ambrose urged her audience to not push the panic button. “Everybody in business is trying to wrestle with how to decipher what information out there actually matters — what is true, what is relevant, or is it just another tweet by the most powerful man in the world,” Ambrose said. “We’ve seen a complete realignment of politics in the U.S., and frankly globally. Nothing’s what it used to be and nothing is what it seems right now.”
Still, Ambrose attributed some logic to what’s going on. “I would suggest to you that these guys are not crazy, they’re not unpredictable, they’re extremely strategic, and they know exactly what they’re doing with these trade wars. They’re creating this level of uncertainty for a reason — because it benefits them.”
Optimism expressed
“We need to get back to a global market. If it’s not going to be China, it’s going to be Turkey, and if it’s not going to be Turkey it’s going to be India, and if it’s not going to be India, it’s going to be somebody else.”— Geoff Williams, executive vice-president, Eveley InternationalIn the photo above, Byron and Brandon Eveley flank Geoff Williams, executive vice-president of Eveley International, at the company’s booth at the table-top trade show at CTEA’s annual conference.Photo: Saul Chernos
Manufacturers attending the conference expressed optimism that trade frictions will be sorted out. Geoff Williams, executive vice-president with Eveley International, a Hamilton, Ont. manufacturer of trailer axles and suspensions, said he hopes NAFTA’s renegotiation spells an end to the tariffs. “This whole trade war thing — nobody ever wins,” Williams said. “We need to get back to a global market. If it’s not going to be China, it’s going to be Turkey, and if it’s not going to be Turkey it’s going to be India, and if it’s not going to be India, it’s going to be somebody else. There’s always going to be that low-cost provider.”
Based in Troy, Michigan, Meritor Trailer Products does business in Canada and Mexico, and OEM account manager Mike Guay said a renegotiated NAFTA will mean little if the tariffs remain in place. “We’ll have to wait for the next tweet to find out for sure,” Guay said. “Right now there’s no rules. Anything can happen.”
Parker Hannifin, based in Cleveland, Ohio, makes hydraulic components, pumps, and valves as well as Chelsea-brand power take-offs. George Artem, truck products sales manager for Canada, said the tariffs have resulted in price increases on some imports but his company hasn’t felt the degree of pain companies tied to the automotive sector have experienced. “Last year we were up approximately 15 to 16 percent, and this year is about the same — we’re up about 10 to 15 percent.”
TSE Brakes has its head office in Cullman, Alabama but assembles in San Luis Mexico and does business globally, so NAFTA and tariff issues are significant. “We pay the tariff once, and then we pass it on to the customer,” said Alain Mineault, Canadian sales manager. “I don’t know where this is going, actually nobody really does. We’re living in very interesting times, so everything is a surprise. But at the same time nothing is a surprise.”
The CTEA’s 2019 conference takes place Sept. 30 to Oct. 2 in Mont-Tremblant, Que.
— Saul Chernos
Saul Chernos is a writer and regular contributor to STM. He is based in Toronto.