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Canadian uranium under U.S. tariff threat as national security investigation continues

By Neil Moss      

A 1989 investigation found there was no national security threat from uranium imports, but experts agree times have changed under President Trump.

The use of Section 232 investigations under U.S. President Donald Trump has complicated the relationship with Prime Minister Justin Trudeau, with the lingering tariffs on Canadian steel and aluminum imports. Photograph courtesy of the White House/Shealah Craighead
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Canada’s uranium industry may soon find itself burdened by the same U.S. protectionist tariffs that have been targeted at Canada’s steel and aluminum sectors since the summer under the guise of national security protection, trade observers say.

On July 18, the U.S. Commerce Department began a Section 232 investigation looking into uranium imports and if they pose a national security threat to the United States. The investigation is looking at everything from uranium enrichment to mining.

Investigations are conducted under Section 232 of the 1962 Trade Expansion Act, which gives the White House the power to slap duties or quotas on a product if it is determined that it threatens U.S. national security. This had typically been a rarely used tool before President Donald Trump took over the Oval Office.

“The president has people he likes in places like the Commerce Department. You look at what they turned over for steel and aluminum, there’s not much that blocks them from making fairly absurd economic arguments,” said Phil Levy, a former trade adviser in the George W. Bush administration and senior fellow on the global economy at the Chicago Council on Global Affairs, indicating that he thought the result of investigation into uranium imports will come back in Mr. Trump’s favour.

Uranium imports into the United States may be hit with tariffs if a Section 232 investigation find they are a national security threat. Photograph courtesy of Flickr/IAEA Imagebank

Canada produces 22 per cent of the world’s uranium supply, and it’s responsible for 21 per cent of the world’s export supply, according to Natural Resources Canada. Canada exports around 88 per cent of its uranium.

“You’ve got to bet that the Trump administration when they launch a 232 investigation, they are going to find there is some threat to national security, and they’re going to carry through with it,” Eric Miller, former senior policy adviser to the Canadian Embassy in Washington, D.C., and current head of the Rideau Potomac Strategy Group, told The Hill Times, adding the Canadian uranium industry needs to figure how they will survive a 25 per cent duty.

Mr. Miller said there is no sense that the influence of industry and its associations have much sway during Section 232 investigations given they involve national security.

“One doesn’t see with these investigations that they are letting evidence that is provided from outsiders have a fundamental impact on shaping what gets used,” he said.

The concern over uranium imports comes from the decline in domestic uranium production in the United States. The U.S. Commerce Secretary Wilbur Ross said in a press release that domestic production has dropped to five per cent of national use from 49 per cent in 1987. The problem is magnified by the traditional overproduction of uranium which led mining firms to announce they would be scaling back their production.

“With respect to the ongoing S232 investigation, like with steel and aluminum, we maintain it’s inconceivable that Canada could be considered a security threat to the U.S.,” Natural Resources Minister Amarjeet Sohi (Edmonton Mill Woods, Alta.) said in an email to The Hill Times. “We continue to advocate that Canada is a secure, reliable and market-based supplier of uranium, and that we should be exempted from any potential trade action.”

National security investigations on uranium have a history

The action was brought forward by U.S. uranium firms that say the situation has gotten worse since 1989 when a previous Section 232 investigation found that uranium imports did not pose a national security threat, despite the heavy reliance on foreign uranium.

The 1989 study found that “the richest and most accessible” uranium deposits aren’t found in the U.S., and it is much cheaper to mine uranium in countries like Canada and Australia. Under the now suspended United States-Canada Free Trade Agreement (FTA), uranium was exempt from any import restrictions. According to the U.S. Commerce Department report, it was the view of Canadian law that the then-FTA restricted the use of Section 232 duties on uranium as Canada forbids the export of uranium for non-peaceful uses.

“I think it’s unlikely this Commerce Department looks back because the approach that they’ve taken that economic security is national security is novel,” Prof. Levy said. “It’s novel, and it’s brazen. Their view is that everyone who came before, there were naive globalists, why should they follow that they said? These people can see things clearly and understand how great protectionism is, so they will rely on their own analysis.”

Natural Resources Minister Amarjeet Sohi says it’s ‘inconceivable’ that Canadian products, such as uranium, can be considered a national security threat to the United States. The Hill Times photograph by Andrew Meade

He added that during the Section 232 investigation into steel and aluminum imports, the Commerce Department didn’t look back at previous jurisprudence.

Mr. Miller said they will look at the past case, but noted the political will is different. In 1989, then-U.S. president George H.W. Bush was a free trader who had a friendly relationship with Canada.

“In the 1989 world, you didn’t have the [ongoing] 232 on autos, and a 232 steel and aluminum. … No doubt they started the uranium case in part out of inspiration of taking the arguments from [1989] and looking at them again, because in essence they need to show there’s a track record of legitimacy using the instrument in this way,” Mr. Miller said.

Carlo Dade, director of the trade and investment centre at the Canada West Foundation, said it helps the Canadian case that there was an unsuccessful case in the past to impose a Section 232 action.

The previous ruling should give Canada a bit more confidence, he said. “That precedent should give us a small [amount] of comfort.”

Previous Section 232 investigations by the Trump administration found the import of steel and aluminum threatened American national security and the U.S. slapped a 25 per cent tariff on Canadian steel, and a 10 per cent duty on aluminum. The tariffs were imposed on the Canadian staples in the midst of increasingly testy trade talks over the replacement of NAFTA. Now that the new United States-Mexico-Canada Agreement has been signed, but not ratified, the duties remain.

Prof. Levy said the steel and aluminum Section 232 investigation and subsequent tariffs served as “proof of concept,” and it allows the White House power over trade policy, which is constitutionally under the jurisdiction of the Congress. He added the Trump administration has expanded the scope of the investigation maintaining that anything that threatens the United States’ economic security threatens its national security.

“This can be extended to anything,” Prof. Levy said.

Under the new trilateral trade deal, Canada and the U.S. agreed to a side letter in which the United States will not impose a duty following a Section 232 investigation that found a Canadian product threatened America’s national security for a period of 60 days when the two countries can negotiate “an appropriate outcome,” which will be “based on industry dynamics and historical trading partners.”

Prof. Levy said the waiting period won’t have much of an impact on the Trump administration, as leverage is more persuasive than discussion, and Canada has lost much of its leverage with the new agreement signed.

Canada’s already troubled uranium producers, workers face uncertain future

Canada’s largest uranium producer, Cameco, contends that Canada’s uranium doesn’t endanger American natural security. The Saskatchewan mining firm ships 30 per cent of their total sales by volume to Canada’s southern neighbour.

In a Sept. 25 press release, Cameco said any move to a quota system would damage the “responsible participants” in the U.S. nuclear energy industry.

“Tariffs should not be considered as a remedy, as they would need to be prohibitively high for U.S. utilities in order to make U.S. uranium production economical,” the press release read.

A spokesperson for Cameco said in an email the company can’t speculate on the findings of the Section 232 investigation and can’t speculate on the impacts of the findings and how they would respond.

Scott Lunny, a representative of United Steelworkers in Western Canada, said there are currently difficult market conditions for uranium producers, with significant layoffs and shutdowns. He said there have been about 400 to 500 members laid off in the mining sector, which were caused by the same market conditions that led the U.S. uranium producers to push for tariffs.

“Our concern is [tariffs] will make it that much more difficult, if not impossible, to get members back working in the mining sector in Saskatchewan,” Mr. Lunny said. “If you add tariffs to difficult market conditions, it will guarantee that they’re right out of the game.”

There’s no rational or logical reason for Canada’s uranium production to be viewed as a national security threat, Mr. Lunny said, or even included in the investigation.


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