Free trade, a hot topic at Mineral Outlook ’88

Although most tariff barriers between Canada’s mineral producers and mineral buyers in the U.S. are already relatively low, the Mining Association of Canada (MAC) has come out strongly in favor of the agreement because of clauses in the agreement for settling disputes.

The free trade agreement was the main subject of discussion at the annual Mineral Outlook Conference held here in May. The conference is jointly sponsored by the MAC and the federal department of Energy, Mines and Resources. An estimated 600 people turned out, many of them senior executives of Canada’s major mining companies, to hear experts on global mineral trade talk about the challenges facing the industry in the 1990s.

“Since 1965, the United States has imposed, or tried to impose, trade actions on the minerals and metals sector 26 times,” said Mines Minister Gerald Merrithew in his welcoming address.

“Without a free trade agreement, this situation would undoubtedly become worse,” he said.

This opinion was backed up by Donald Macdonald, a lawyer for McCarthy & McCarthy of Toronto and former Trudeau cabinet minister. “The free trade agreement is a good first step and should be passed swiftly,” he says. More negotiations are needed on regulations concerning anti-dumping and countervailing subsidies, he said, subjects which were not changed by the agreement.

Robert Herzstein, a Washington- based lawyer, says that because of the watchdog provision in the legislation and the bi-national review provision, cases like the softwood lumber case of 1986 could not be repeated under the free trade agreement.

But, clearly there are very strongly-held and opposing views in the industry on the free trade agreement. The United Steelworkers of America, for example, is going to fight the agreement “every step of the way,” according to Gerald Pelletier, senior economist for the Canadian Labor Congress, who delivered a speech for G. Docquier, national director of the United Steelworkers of America.

“A multilateral approach to global free trade under the GATT would give Canada a better shake,” Pelletier says.

If the agreement comes into effect Jan 1, 1989, as planned, it could have legal implications for Vancouver-based Teck Corp. Financial assistance which Teck received from the Alaskan government for the Red Dog project could potentially become grounds for countervail duty action by Canadian producers under the terms of the free trade agreement.

Despite all the talk about free trade, the biggest challenge facing the mining industry, according to Norman Keevil, Jr, president of Teck Corp. and in-coming chairman of the MAC, is to replace base metals reserves.

“Canada needs more and better mineral exploration,” he said, “to replace reserves which have dwindled by 20-25% because of the emphasis on gold exploration.”

New reserves discovered in Canada could be used to supply smelters in China as well as those in Canada, Economic Advisor for Rio Tinto Zinc, Philip Crowson, suggested. It is believed that that country does not have high enough grades to justify mining, he said, but it is building a large smelting capacity. The same European zinc smelters which enjoyed health profits in `84-`85 are now fighting for their survival.

Other points of interest which were expressed at the conference include:

* Teck would “like nothing better” than to develop copper smelting capacity in Canada. But to build it near the Highland Valley mine would be foolish at this time, Keevil says. If the reserve base can be increased from the current 20 years, such an idea could be feasible.

* A move to LME prices for zinc may be inevitable, RTZ’s Crowson predicts.

* Also on the price side, Crowson says, “everyone has been expecting to see prices (for base metals) drop this summer, but recent events on the LME make that a silly assumption. I doubt very much that we’ll see a return to price levels we saw before the upswing last year.”

Cominco Ltd.’s Vice-president marketing and sales, Klaus Goeckmann agrees. “What will probably prolong the price trend,” he says, “is the fact that mining companies are selling forward, which creates the machinery to sustain prices.”

* Keeping nickel on the international list of suspected carcinogens could have very serious repercussions for the industry, according to Cristain Bozec of ERAMET- SLN of France.

* Junior companies in the mining industry should take a hard look at how they do business so that they can manage environmental regulation rather than be managed by it. The majors are already doing a pretty good job of dealing with socio-economic issues. But the juniors’ track record tarnishes the public’s perception of mining, according to Elise Lavigne-Bruchet, a partner with Dimensions Planning in Calgary.

* And Canada and Sweden could benefit from co-operative work in studying the long-range effects of metal emissions from mining and smelting operations.