Moldmaking Report: Moldmakers mount a defence

Canadian firms band together to make their case before two international trade tribunals

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June 1, 2002 by Cindy Macdonald, associate editor

Two global trade issues have penetrated Canada’s borders, and could have a negative effect on the already battered bottom line of Canadian moldmakers. A potential homegrown steel tariff could raise the cost of importing steel and a U.S. trade investigation has raised the possibility of Canada being lumped in with other foreign competitors and facing punitive charges on molds exported to the U.S.

The steel issue has been reverberating around the world as overcapacity and falling prices plague the industry. On March 5, 2002, the U.S. announced that it was imposing tariffs ranging from 8% to 30%, on imports of certain steel products. Under the NAFTA, both Canada and Mexico were excluded from these import restrictions. Mold and tool steels are also excluded from the tariff.

In light of the U.S. action, the Canadian steel producers expressed concerns of trade diversion, where the excess capacity of steel originally destined for the U.S. market would be dumped in Canada. The federal government responded by asking the Canadian International Trade Tribunal (CITT) to conduct a “safeguard” inquiry to determine whether increased imports are causing “injury” to the domestic steel industry.

A question of definition

If the CITT determines that serious injury or threat of serious injury is occurring as a result of steel imports into Canada, the government could impose tariffs, quotas or other punitive measures on those imports deemed injurious. The problem for Canadian moldmakers is that mold, tool and high-speed steels are not treated as distinct categories under the coding used by the Canadian government to measure imports and exports, thus these steels may be grouped with other steel products if punitive measures are invoked.

“We are extremely concerned about this issue,” says Faris Shammas, executive director, CPIA, Ontario Region, “because if our costs for raw materials rise, we won’t be as competitive. Moldmakers won’t be as competitive, nor will the plastic processors who use those molds.”

The CITT hearings are taking place this month, and any determination with respect to injury is due July 4. The Tribunal then presents a report and its recommendations for remedies by Aug. 19.

Christopher Kent is a lawyer representing several producers and importers of tool, mold and high-speed steel. He says there is a strong case to be made for not including these specialty steels in any punitive actions, but, on the other hand, “there has been a conscious inclusion of specialty steels in the safeguard inquiry.”

In Kent’s view, there are two valid reasons to exclude tool, mold and high-speed steels in a safeguard investigation. First, a surge in imports of these steels is not likely because these categories were excluded from the U.S. safeguard action. Second, “There are huge holes in the product range available from Canadian suppliers, so “injury” to domestic producers is unlikely.

However, the final decision of whether to apply remedies is a political one, so CPIA and other agencies are mobilizing members to make their views known to the Secretary of State for International Financial Institutions and other federal politicians.

One encouraging bit of news is that the CITT has stated it will consider information concerning mold, tool and high-speed steel separately from the other broad product categories, which include carbon and alloy plate, sheet, coil, bars and tubular pipe.

Fighting American perceptions

The Canadian mold, tool and die industry will also be under scrutiny as part of a larger “general factfinding” investigation by the U.S. International Trade Commission (ITC) (see Canadian Plastics, March 2002).

To counter any impression of unfair competition, several Canadian associations have proactively banded together to crunch the numbers and ensure an accurate assessment is made.

“Using the best data we can get, including figures from companies that have operations on both sides of the border, we find that it is only slightly cheaper to produce molds in Canada,” says Horst Schmidt, a director of the Canadian Tooling and Machining Association (CTMA). “The difference in costs is in the single digit range. For all intents and purposes, we are on a level playing field.”

Schmidt is leading a joint committee formed by several associations to address the U.S. ITC investigation and the Canadian steel “safeguard” case. The committee is a joint effort of CTMA, the Canadian Association of Moldmakers (CAMM), the Canadian Plastics Industry Association (CPIA) and the Canadian Diecasters Association.

One of the key misconceptions, says Schmidt, is the perceived advantage of our lower-valued currency. “Americans think we have a 40% cost advantage based on the difference in our currency, but really, we buy raw materials at U.S. prices, we pay a similar price for consumables.

“This is a very, very emotional issue in the U.S., and we have to fight these ‘armchair statistics’.”

Although Canadian organizations could not participate in the ITC’s public hearings, the joint committee will likely be able to present its findings to an ITC investigator charged with evaluating the U.S.’s international competitors.CPL

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