Letter to the Hon. William Morneau, Minister of Finance, regarding U.S. 232 retaliation consultations on steel and aluminum tariffs

Dear Minister,

The Business Council of Canada supports the government’s strategy in responding to the unjustified tariffs imposed by the U.S. Administration on steel and aluminum products. Canada must stand up for the interests of Canadians and in support of the rules-based global trade system.

As you review input from companies on the proposed countermeasures, we ask that you consider the following:

Substitution – We recommend that countermeasures be placed only on products where substitutes are readily available. This will minimize the impact of such measures on both Canadian companies and consumers. In situations in which substitutes are unavailable, companies would be forced to pay the tariff and then pass along the costs to their customers – other businesses or consumers.

Intermediate goods – Where possible, tariffs on intermediate goods should be avoided to prevent supply chain fragmentation. For example, small and medium-sized enterprises (SMEs) are often contracted to provide components to other companies at a pre-agreed price. If tariffs result in higher costs, suppliers might not have the ability to raise their prices. This would inflict serious harm on SMEs and could force large Canadian manufacturers to shut down due to shortages of key parts and other inputs.

Escalation – We are of course deeply concerned that this trade dispute could escalate, plunging both the United States and Canada into recession. If the U.S. takes additional protectionist measures, we trust that you will again respond in a measured and thoughtful manner so as to minimize the impact on Canadian workers and the Canadian economy.

Minister, Canada’s attractiveness as an investment destination is under threat not only due to U.S. protectionism but also as a result of recent U.S. tax and regulatory reform. As outlined in my letters to you dated December 14, 2017, and February 14, 2018, we strongly recommend that the government develop and implement a comprehensive strategy to make Canada a more attractive place to invest, create jobs and service global markets. A strategy to strengthen Canadian competitiveness must include the creation of a world-class regulatory environment and a plan to reform and simplify Canada’s tax system.

In closing, Canada’s business leaders fully support your government in its efforts to resist protectionism and protect Canadian workers. We would welcome an opportunity to discuss these recommendations with you at your earliest convenience.

Sincerely,

John Manley

c.c. The Honourable Chrystia Freeland, P.C., M.P.
Minister of Foreign Affairs
Global Affairs Canada

The Honourable François-Philippe Champagne, P.C., M.P.
Minister of International Trade
Global Affairs Canada

International Trade Policy Division (Finance Canada)