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<title>CANADA WELCOMES U.S. STEEL DECISION</title>
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<p><font face="Arial"></font><font face="Arial" size="+1"></font><font face="Arial" size="+1"></font><font face="Arial" size="+1"><strong>March 5, 2002 <em>(4:45 p.m. EST)</em> No. 23</strong></font></p>
<p><font face="Arial" size="+1"><strong>CANADA WELCOMES U.S. STEEL DECISION</strong></font></p>
<p><font face="Arial">International Trade Minister Pierre Pettigrew today welcomed a decision by U.S. President Bush to exclude
Canadian exports from restrictions on U.S. imports of a number of steel products.</font></p>
<p><font face="Arial">The decision ends eight months of uncertainty for Canadian steel producers and means that Canadian exports
will continue to flow unimpeded to U.S. customers. Of total Canadian steel exports of $3.6 billion, import
restrictions could have been imposed on exports of six products valued at about $1.86 billion.</font></p>
<p><font face="Arial">"This decision comes after vigorous representations and advocacy work by the Government of Canada, the
provinces and the industry," said Minister Pettigrew. "Over the last several months, Canada consistently and
forcefully argued that the Canada/U.S. steel trade is unique, is mutually beneficial, and operates in an
integrated market. Our message that restrictions on imports from Canada would significantly disrupt the
operation of the integrated North American market was understood and I commend the President for
recognizing this and acting on it," added the Minister.</font></p>
<p align="CENTER"><font face="Arial">- 30 -</font></p>
<p><font face="Arial">A backgrounder is attached.</font></p>
<p><font face="Arial">For further information, media representatives may contact:</font></p>
<p><font face="Arial">Sébastien Théberge</font></p>
<p><font face="Arial">Office of the Minister for International Trade</font></p>
<p><font face="Arial">(613) 992-7332</font></p>
<p><font face="Arial">Media Relations Office</font></p>
<p><font face="Arial">Department of Foreign Affairs and International Trade</font></p>
<p><font face="Arial">(613) 995-1874</font></p>
<p><a href="https://bac-lac.wayback.archive-it.org/web/20070221022101/http://www.dfait-maeci.gc.ca/"><font face="Arial">http://www.dfait-maeci.gc.ca</a></font></p>
<p><font face="Arial" size="+1"><strong>Backgrounder </strong></font></p>
<p><font face="Arial"><strong>The Section 201 Investigation</strong></font></p>
<p><font face="Arial">Further to a June 22, 2001 request by the U.S. Trade Representative, the U.S. International Trade Commission
(ITC) conducted a safeguard investigation to determine whether the domestic steel industry had been seriously
injured by an increase in imports. Unlike anti-dumping or countervailing duty investigations, safeguard or
Section 201 investigations focus on all imports, whether fairly or unfairly traded. The purpose of such
investigations is to determine whether the domestic industry has been seriously injured by an increase in
imports. If the ITC makes an affirmative determination, it then recommends a remedy, usually in the form of
import action, to the President. The latter has complete discretion over whether to take action and the type of
action to take. </font></p>
<p><font face="Arial">Under the North American Free Trade Agreement (NAFTA), imports from Canada (and Mexico) can be
exempted from actions if imports from either country are found not to be contributing significantly to injury to the
domestic industry. In this case, however, in its October 22, 2002 injury determination, the ITC made a finding
that imports of six specific products from Canada were contributing to injury.<a href="#N_1_"><sup>(1)</sup></a></font> Imports of these products into
the United States from Canada accounted for 44 percent of the total volume of Canadian steel exports to the
United States. In addition, under NAFTA, if imports from Canada are included in any import remedy action, any
such action cannot have the effect of reducing imports from Canada below recent import levels. The United
States would also have to provide compensation to Canada having equivalent trade effects. If the two sides
cannot agree on compensation, Canada would be free to retaliate against the United States. In all, the ITC
made findings of injury with respect to 16 specific products<a href="#N_2_"><sup>(2)</sup></a></font>.</p>
<p>On December 7, 2001, the ITC, which was divided on the issues of both injury and recommendations, made
remedy recommendations that ranged from additional tariffs to import quotas, with respect to imports of the six
specific steel products from Canada as well as imports of 16 steel products from all other sources. The ITC
submitted its formal report to the President on December 19, 2001. Because the Administration subsequently
asked the ITC for more information, the President, who had until February 17, 2002, to respond to the
recommendations, postponed the decision to March 5, 2002. </p>
<p><strong>The President's Decision</strong></p>
<p>While the President took no action on imports from Canada, he did impose safeguard action, in the form of
additional tariffs, on imports of 16 steel products found by the ITC to be seriously injuring the U.S. industry. The
President's decision also included a number of adjustment measures that will assist U.S. industry to consolidate
and merge and to shed inefficient production capacity.</p>
<p><strong>Multilateral Steel Discussions</strong></p>
<p>Over the past two years, like many steel industries around the world, the Canadian steel industry has been
experiencing a very difficult period. The continuing and growing global overcapacity in steel, collapsing or still
recovering demand in some steel markets, and the continuing emergence of new participants in international
steel trade led to a significant surge in low priced steel imports into many countries, including Canada. While
Canadian industry has frequently petitioned for trade remedy protection in the form of anti-dumping and
countervailing duties over this period, Canada has long recognized that the application of trade remedy
measures could only offer a short-term response and that the underlying problems facing the steel industry
could not be addressed solely through the application of such laws. </p>
<p>It is in this context that Canada has been pursuing, in forums like the Organization for Economic Co-operation
and Development (OECD) Steel Committee, a multilateral initiative to develop solutions to current steel trade
problems, mainly the problem of worldwide overcapacity. Canadian embassies and missions in steel producing
countries were tasked with pursuing the initiative on a bilateral basis while industry representatives are pursuing
similar ideas through groups like the International Iron and Steel Institute. Canada has been suggesting that in
order to deal with the problem of overcapacity, the issues of subsidization and closed steel markets must first
be addressed. Further to the announcement of President Bush's Steel Plan of June 5, 2001, the United States
began to pursue the same initiative and began actively pushing for high level meetings in the OECD. </p>
<p>Since September 2001, three high level meetings have been held. The Third High Level Steel Meeting, which
was held on February 7 and 8, 2002, with 38 countries plus the European Commission participating, concluded
with the establishment of two groups: a Disciplines Study Group dealing with government intervention and other
distortions in steel markets; and a Capacity Working Group dealing with the closure of inefficient capacity,
restructuring developments and financing issues. Countries also agreed "to explore the scope for a political
commitment by participants to voluntarily limit or, where possible, eliminate market distorting government
measures related to the steel industry, except for the purpose of facilitating closures." The next high level
meeting, which is scheduled for April 18 and19, will review efforts of the two Groups, which are slated to meet
March 13 to 15, and determine how process begun at the First High Level Meeting in September can be
advanced. It is hoped that the President's decision will not disrupt this process. </p>
<p><strong>Possible Import Diversion</strong></p>
<p>In a July 19, 2001 press release, Ministers Pettigrew and Cauchon, as well as Secretary of State Peterson,
announced their endorsement of a plan developed by a government-industry working group to address steel
trade problems. The working group focused on options for addressing a) the possibility of import restrictions on
Canadian steel exports to the U.S. market, and b) the possibility that U.S. action, or threat of such action, could
divert offshore imports to the Canadian market. </p>
<p>In order to help ensure stability in the Canadian market and unimpeded access to the U.S. market, the working
group made the following recommendations: i) develop a coordinated approach to the U.S. Section 201
investigation; ii) conduct government/industry import monitoring; and iii) respond to evidence of diversion.
Regarding the latter, it was agreed that the government could exercise the following options based on the
circumstances (i.e., the nature of the steel imports, industry interests and the appropriate legal remedy): </p>
<p>a) a government-initiated anti-dumping investigation that would target the sources of the diverted imports; </p>
<p>b) a government referral to the Canadian International Trade Tribunal (CITT) to initiate a safeguard
investigation against those products where there is evidence of diversion. This is under active consideration at
this time; and</p>
<p>c) in the case of critical circumstances, the government could impose a provisional surtax and request the CITT
to initiate a safeguard investigation.</p>
<p><strong>Canada/U.S. Steel Trade </strong></p>
<p>Canada and the United States have been, and continue to be each other's best, most reliable and dependable
steel customers. U.S. steel exports to Canada, valued at $3.5 billion in 2000, now account for almost 60
percent of all U.S. steel exports, a significant increase over the level of 33 percent of all U.S. steel exports less
than a decade ago. In 2000, Canadian steel exports to the U.S, valued at $3.6 billion, represented 96 percent
of total Canadian steel exports. Steel imports from Canada accounted for 3.7 percent of the U.S. market, while
imports from the U.S. accounted for almost 20 percent of the Canadian market. It is suggested that the impact
of this decision on Canadian steel exports will be beneficial. Not only is it expected that U.S. domestic steel
prices will rise but Canada, as an unrestricted supplier into the U.S., will be in a unique position to take
advantage of those higher prices.</p>
<p><a name="N_1_">1. </a></font><font face="Arial" size="-2"> Hot-rolled bars; cold-rolled bars; welded tubes; carbon flanges, fittings and tool joints; stainless bars and light shapes; and stainless flanges and fittings.
<p><a name="N_2_">2. </a><font size="-2"> Slabs; plate; hot-rolled sheet; cold-rolled sheet; galvanized; tin plate; hot-rolled bar; cold-rolled bars; rebar; welded tubes; carbon flanges, fittings and tool joints; stainless bars and
light shapes; stainless steel rod; tool steel; stainless wire; and stainless flanges and fittings.
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