Home August 2018 Steel and Aluminum Trade War has Local Impacts

Steel and Aluminum Trade War has Local Impacts

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David MacLean

Canadian Manufacturers & Exporters (CME) member Argus Machine is an Edmonton-based company that operates an engineering and design facility servicing oil and gas clients from across North America, and they’ve been doing it successfully since 1958. They are caught up in the ongoing trade dispute over steel and aluminum with United States.

Argus and their clients bring raw materials from American suppliers into Canada, where premium threading is applied to drill pipe, casing and tubing in their 100,000 square foot manufacturing facility. Proposed countervailing tariffs imposed by the Canadian government – a retaliation to identical tariffs imposed by the Trump administration – could make it 25 per cent more expensive to do that work here in Alberta. Argus already faces stiff global competition every day. A stiff tariff will mean they are fighting with one arm tied behind their back.

Additionally, the retaliatory list includes a range of manufacturing inputs – like Argus Machines’ – that are not readily available from Canadian sources. Changing suppliers to firms in Asia or Europe isn’t as easy it sounds. Argus has strategically invested in a North American supply chain – a process that takes years. Argus and their 195 employees face possibly their biggest threat since the oil and gas downturn began, and countless companies in Alberta face the same uncertainty.

As my CME colleague, Mathew Wilson, told the Parliamentary Standing Committee on International Trade at the end of June, the current tariffs on steel and aluminum and the specter of a global trade war represent an existential threat to Canadian manufacturing and to the entire Canadian economy.

The federal government was right to impose retaliatory tariffs. They are a just response to the frankly absurd and insulting premise with which the US administration levied steel and aluminum tariffs on Canada. Most manufacturers support the counter tariffs and they understand the political necessity to do so. However, they are also concerned Canadian counter tariffs will have a major impact on their businesses, especially if the tariff fight drags on. There will be pain. The question is “how do we reduce that pain?”

Our nation’s top priority must be to successfully conclude NAFTA negotiations as soon as possible. NAFTA instability is the true threat to manufacturing and to the entire Canadian economy, while tariff fights are distractions designed to take our eye off the ball.

The government must be careful to not inflict irreparable economic harm on Canada and its most important and trade exposed sector: manufacturing, and the government must take action to support potentially distressed companies to spur investment and weather the storm.

The only way to look at this is situation is “short term pain for long term gain.” Our federal officials need to ignore the distractions and negotiate a new, modernized NAFTA that will boost Alberta exports in the long term. It won’t be easy, but it can be done.

Canadian Manufacturers & Exporters (CME) is the voice of Canadian manufacturing. CME represents more than 2,500 companies who account for an estimated 82 per cent of manufacturing output and 90 per cent of Canada’s exports.

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