Thank you, Madam Chair.

Good morning, everyone. We really appreciate the opportunity to appear before you today to share the views of Canadian steel producers on the role of trade measures as part of Canada's climate change response.

As this committee is aware, the CSPA is the national voice of the Canadian primary steel industry, as well as of some of the largest steel users in Canada. Our 16 members represent 123,000 direct and indirect jobs. They contribute $15 billion to the GDP and have facilities in Alberta, Saskatchewan, Manitoba, Ontario and Quebec.

In general terms, carbon trade measures are seen as a tool to level the playing field for domestic industries that face higher costs due to domestic climate policies, and to prevent carbon leakage through shifts to jurisdictions with less environmental regulation. Trade measures should indeed form part of Canada's comprehensive tool kit in the fight against global climate change. That said, these measures can take many forms. I will share with you some views on two distinctly different approaches that we are witnessing globally around steel-specific carbon trade measures—namely, the CBAM in the EU and the product intensity tariff approach contemplated and under preparation in the United States.

The CBAM requires importers to purchase certificates that mirror the net carbon price paid by the EU's domestic industry. The design of the CBAM has major flaws for the EU steel industry, given its accelerated phase-out of free allocations in its carbon pricing regime, as well as a lack of export tax rebates. These concerns far outweigh the benefits gained from having the CBAM in place. Similarly, the Canadian steel industry would share these concerns if CBAM, as designed in the EU, were adopted here in the same manner.

Furthermore, Canada has another consideration that warrants careful attention. Basing a carbon tariff on a carbon pricing regime would undoubtedly create trade tensions with our largest trading partner, which does not have a carbon pricing regime. For all of these reasons, the CSPA would reject an approach to carbon trade measures in Canada that mirrored the EU's CBAM.

Alternatively, the United States has launched a major undertaking through the U.S. International Trade Commission, the USITC, to establish product-level carbon intensity-based tariffs for steel imports into the United States. Essentially, tariffs would be set for a range of carbon intensities for a range of products and would apply to the import price of the steel, making it very similar to a “232-style” tariff regime. This refers to section 232, one of the tariff programs in the United States. The USITC will deliver their body of work to the new Trump administration in February, opening up, in our view, another possible tariff pathway to be pursued by that administration, should they choose.

It is worth noting that the steel industries of Canada and the United States have comparable carbon intensity levels for steel products. According to a third party benchmarking study conducted by the Global Efficiency Intelligence consulting firm, our respective intensities are many times lower than those of offshore steel producers, particularly those with a track record of unfair trade—China, Turkey, Vietnam and many others. The CSPA would be happy to submit this benchmarking study to CIIT for your reference, if it's deemed of use.

I'd like to remind the committee that 50% of Canadian steel production is exported to the United States, while only a negligible amount, around 0.1% of all exports, is shipped to the EU. To be clear, market factors, as well as the overall carbon performance levels, suggest that climate tariff alignment with the United States would be far more favourable than one between Canada and the EU.

Furthermore, a carbon tariff approach coordinated with the U.S., if it could be arranged—that's a big “if”—would provide another opportunity to strengthen what is already one of the strongest trading relationships in the world and further our critically important efforts to align trade policy with the United States.

From tariffs on Chinese steel products to requiring country-of-melt reporting for all imports and the many trade cases launched by the industry, Canada is on its way to demonstrating, with real proof, just how serious we are about protecting our respective markets from unfair trade.

Thank you.

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