When Canada’s ambassador in Washington tipped her off that U.S. President Donald Trump’s trade representative had been talking to Deputy Prime Minister Chrystia Freeland about restoring the 10 per cent tariff on Canadian aluminum, Quebec’s representative in New York began drawing up a counter-plan of her own.
The American tariffs have since come into effect and Freeland has promised “dollar-for-dollar” retaliation, beginning in a month.
Catherine Loubier, Quebec’s delegate-general in New York, has been working on an outreach campaign with her counterparts in eight U.S. cities, as well as Jean Simard, the president and CEO of the Aluminum Association of Canada.
Loubier is tapping into corporate, political and union contacts developed by Quebec’s Rockefeller Plaza delegation over the years, making over 75 interventions so far. She’s making cold calls, too, developing new contacts and working out a cross-border plan.
“It’s one market,” Loubier said, noting that in the manufacturing process, goods can cross the U.S.-Canada border “two, six, eight times” in the course of being made.
“We should be competing together.”
Maryscott Greenwood, CEO of the Canadian American Business Council, was among the allies Loubier recruited to oppose what she terms the “lose-lose” tariff.
With Greenwood, Loubier developed North America Rebounds, an initiative designed to combat protectionist measures, such as the aluminum tariff, that have emerged in response to the COVID-19 pandemic.
“It is more crucial than ever to fight protectionism, bolster supply chains and keep the border fluid in order to revive growth and ensure that our economic region remains one of the strongest and most competitive in the world,” Loubier wrote in support of the rebound.
Signers of the rebound initiative, on both sides of the border, include the U.S. Chamber of Commerce, the National American Manufacturers Association, the Canadian Chamber of Commerce, as well as provincial chambers in Ontario and Quebec, and businesses in the U.S. and Canada committed to free trade.
Loubier sees the motivation of the Trump administration as purely political.
The aging, inefficient, polluting smelters the tariff protects are in Kentucky, Missouri and South Carolina, states his Republicans hope to hold.
She’s looking beyond the U.S. election date of Nov. 3 for a lifting of the tariff, after political motivation is no longer a factor.
A North America Rebounds roundtable is planned for Oct. 26. By then, the aluminum market, whose output was distorted by the COVID-19 economic shutdown in both countries, should be back to normal, she said.
Loubier is courting U.S. politicians in both parties, in the hope that after the election, whichever party wins, the case for Canada’s smelters will be heard. Among the allies she has found is Rep. Elise Stefanik, a Republican and a staunch defender of Trump at his impeachment hearings.
Stefanik, who represents a district in Albany, N.Y., is also a free trader who has denounced the aluminum tariff renewal.
“The United States and Canada have a strong economic partnership and trading relationship,” Stefanik wrote in a statement, arguing the move would slow the recovery from COVID-19, and, by harming Canadian producers, would open the U.S. market to aluminum dumped by China.
The Trump administration justifies the tariff renewal, saying there’s been a surge in Canadian aluminum production during the COVID-19 shutdown. Loubier refutes that.
Quebec Premier François Legault called on the province to cease operations during the shutdown, which Simard countered by explaining that because making aluminum is a continuous process, smelters do not close. Leaving the molten silvery metal in the smelters would cause irreparable damage when it solidified.
Nine of Canada’s 10 smelters, built largely by American investors, are located in Quebec, with the 10th at Kitimat in British Columbia.
Low-cost hydro power and access to ports were draws for the industry, which relies on imports of bauxite ore and alumina and on the export of finished products.
Normally, 60 per cent of their output consists of value-added products, which are tailored to the demands of mostly U.S.-based manufacturers, including those involved in aircraft production, construction and electronics, as well as automakers, appliance makers and makers of beer cans, among other products, Simard said.
Canada has to export to the U.S. because it lacks the industrial capacity to consume all the aluminum it produces. When U.S. manufacturing shut down, Canadian smelters had “zero orders” for value-added products, Simard explained.
They had to continue smelting, which involves using electricity to transform bauxite into aluminum, so instead of making value-added products, they switched to making primary aluminum ingots, which are known as P1020.
Previously, in 2017, tariffs covered all aluminum products from Canada. The new round, requested by and favouring only companies Century Aluminum and Magnitude 7 Metals, applies to P1020.
Simard said orders for value-added products are increasing as the U.S. economy reopens, and that will reduce the output of P1020 ingots. Meanwhile, consumers in both countries will pay the price of the tariffs, passed along by U.S. manufacturers. For example, the price of the new Ford F-150 pickup trucks, Canada’s top-selling vehicle, will go up.
Simard said the tariff opens the U.S. market for more Russian aluminum, explaining that Century is 47 per cent owned by Switzerland-based Glencore PLC. Magnitude 7 also has ties to Glencore.
Glencore, in turn, has a 10.55 per cent stake in UC Rusal, the Russian aluminum producer formerly controlled by oligarch Oleg Deripaska, who was under U.S. Treasury sanctions until January 2019. Efforts then to renew the sanctions were blocked in the U.S. Senate by Republican Majority Leader Mitch McConnell of Kentucky, earning him the nickname “Moscow Mitch,” from his Democratic opponents.
Rusal then invested US$200 million to buy a 40 per cent stake in Braidy Industries, an aluminum rolling plant in Kentucky. Glencore now has an agreement with Rusal to sell $16 billion worth of Russian aluminum in the North American market, Simard said.
The aluminum tariff, first imposed by the Trump administration in 2017 for reasons of “national security,” along with a tariff on Canadian steel, was lifted in 2019. It was reimposed, again for “national security” reasons, effective Aug. 16, after intensive lobbying by the two companies in the orbit of Glencore.
It was “the wrong thing at the wrong time for the wrong reasons,” says Simard, whose association includes Alcoa and Rio Tinto Aluminium, huge aluminum producers with operations on both sides of the border.
Rejecting the “national security” argument, Simard said, “We’re part of the U.S. national defence perimeter. It makes no sense at all.”
Simard said Trump’s “presidential proclamation,” issued on a campaign stop in Ohio to announce the tariff renewal, is “only political.”
“I feel like I’m playing for the second time in a C-series movie with an old actor in the White House that has only one role in life: to screw up things for the rest of the world,” Simard said.