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Arvida, Quebec – Putting a Face on the Specter of Trade War Over Aluminum and Steel

Last month, our very own Dan McGroarty argued in a piece for Investor’s Business Daily that the escalation of the trade war over U.S.-imposed trade tariffs on Canadian made aluminum and steel has serious implications not only for our economy, but also for the U.S. defense industrial base.  In it, he outlined the genesis of the United States’ special relationship with our neighbors to the North with whom we share “the world’s most integrated defense industrial base.”

Via a recent Bloomberg story, we are getting a glimpse into what this U.S.- Canadian “symbiosis” looks like.  Danielle Bochove reports from Arvida, Quebec, home to a giant smelter built by Americans that supplied most of the Allied forces’ aluminum in World War II.  Today, as part of the “2.5 million metric tons that Canada sends over the border each year,” the very same smelter provides U.S. beer makers with metal used in their cans, U.S. automakers with the metal used in their cars, and the U.S. military with the metal used in its weaponry.

Writes Bochove:

“The Saguenay–Lac-Saint-Jean region is part of a cross-border ecosystem that supplies almost half of the aluminum used in the U.S., including the metal found in three out of four American cars. Arvida is the epicenter. Built in 1926 by Alcoa President Arthur Vining Davis, the town is an acronym of the American industrialist’s name. One of the earliest examples of a company town, Arvida has been absorbed into the city of Saguenay, but its main street remains vibrant and the original architecture largely intact.”

Retracing the history of the smelter which has supplied thousands local jobs over course of the last century, during which it was hit by the Depression, “reborn” during World War II and saw ebbing and flowing concurrent with global market developments as well as the 2007 takeover by Rio Tinto, Bochove says the industry’s influence can be seen and felt everywhere:

“From 1926 to 1960, only Alcan employees were eligible to serve as city counselors in Arvida, said Bruno Fradette, an amateur historian and third-generation employee. In a tour of the town, he pointed out examples of its American heritage. Buildings and roads are named after American founders, and the main street is lined with posters celebrating its aluminum history.

When Rio [Tinto, ] took over, local sentiment swung from pride in ownership to pride over the asset’s environmental sustainability, Mayor Neron said. Aluminum has long provided high-quality jobs in Saguenay, but initiatives—including a recent push with Apple Inc. to make the metal without greenhouse gases—have the potential to further increase quality. Residents already refer to the region’s product as ‘green aluminum,’ she said, because processing is powered by Quebec’s abundant hydroelectricity.”

In response to the U.S.-imposed tariffs, Canada imposed retaliatory tariffs on US exports worth 16.6 billion Canadian dollars ($12.5 billion).  While industry experts like Rio Tinto’s head of aluminum Alf Barrios believe that U.S. manufacturers ultimately have no choice but to buy from Canada, Arvida’s mayor is concerned about what the escalation of the trade war means for the region and its people.

Writes Bochove:

“For the mayor, the mushrooming trade tensions are depressingly familiar. Saguenay’s other original economic base, pulp and paper, has been devastated by decades of U.S. protectionism around softwood lumber. Neron’s fear is that aluminum will follow.”

To read the full piece, click here.