Canada Attacks U.S. Tariffs by Taking Case to World Trade Organization
Posted January 10, 2018 10:36 p.m. EST
WASHINGTON — Canada has filed a sweeping trade case against the United States at the World Trade Organization, lobbing a diplomatic grenade at the Trump administration’s “America First” approach amid an increasingly embattled trade relationship between the long-standing North American allies.
The trade case could exacerbate tensions between the two nations as they wrestle with trade disputes and attempts to renegotiate the North American Free Trade Agreement. Canada’s case challenges the United States’ use of tariffs to punish unfair trade practices and protect its markets, saying those actions violate World Trade Organization rules.
The case could expand into a multinational trade dispute given that Canada, a champion of global agreements, filed it in a way that allows other countries to join. The 37-page document outlines numerous problematic trade actions that it says the U.S. has taken against China, South Korea, Japan and Germany.
The case, which was filed Dec. 20 and made public Wednesday, centers on the punitive tariffs that the U.S. imposes when it finds other countries guilty of subsidizing their products or of selling them abroad at unfairly low prices, a practice known as dumping. The U.S. has lost cases in the World Trade Organization over this system, which differs substantially from that of many countries.
Robert E. Lighthizer, the U.S. trade representative, called Canada’s action “a broad and ill-advised attack” on the U.S. trade system.
“U.S. trade remedies ensure that trade is fair by counteracting dumping or subsidies that are injuring U.S. workers, farmers and manufacturers,” he said in a statement Wednesday. “Canada’s claims are unfounded and could only lower U.S. confidence that Canada is committed to mutually beneficial trade.”
Canada has borne the brunt of several U.S. trade actions, including a decadeslong dispute over lumber and recent cases against Bombardier airplanes and Canadian newsprint.
“There are now billions of dollars of Canadian exports to the U.S. that are potentially subject to these restrictions,” said Chad P. Bown, a senior fellow at the Peterson Institute for International Economics in Washington. “That’s what this dispute is all about.”
The case could take years to work its way through the World Trade Organization, Bown said, but could eventually help Canada combat the types of trade actions the U.S. is increasingly bringing. It could also help Canada protect itself if the U.S. withdraws from NAFTA or significantly alters key parts of the trade pact that provide an important channel for Canada to appeal trade disputes between the countries.
In a statement, Canada’s foreign minister, Chrystia Freeland, said the World Trade Organization filing was linked to a long-running dispute over Canadian lumber exports.
“This WTO action is part of our broader litigation to defend the hundreds of thousands of good, middle-class forestry jobs across our country,” she said. “We continue to engage our American counterparts to encourage them to come to a durable negotiated agreement on softwood lumber.”
Many of the Trump administration’s trade advisers, including Lighthizer, are staunch defenders of the U.S. system for combating dumping and foreign subsidies. Lighthizer brought such trade cases against foreign actors for decades as a lawyer for the steel industry, and he has criticized the World Trade Organization for interfering in what he sees as the United States’ efforts to enforce its own laws.
Todd N. Tucker, a fellow at the Roosevelt Institute, an economic research organization in New York, criticized Canada’s case as “misguided,” arguing that it might increase opposition within the U.S. to the World Trade Organization. The global group, which works to reduce trade barriers and resolve disputes among its members, is increasingly being viewed with skepticism by the U.S., which had long been its biggest advocate. “At a time when, if Bob Lighthizer had his way, he’d be doing radical reform of the WTO, it seems weird to poke him in the eye with a case like this,” Tucker said.
Tucker also pointed out that many of the trade actions that Canada named in its complaint had been put into place under previous U.S. presidents. “It seems like an unusual way to send a message to Trump, to attack a long-standing U.S. policy approach,” he said.
It is already a fractious time for the two nations. Canada, Mexico and the United States will reconvene in Montreal on Jan. 23 for the next round of NAFTA negotiations. Leaders from all three nations have said they aim to conclude the talks early this year, well before the Mexican presidential election in July, which could lead to a shift in personnel and strategy.
Yet the three countries do not yet appear close to compromise on central provisions of the negotiation, including rules that govern the auto industry and the settling of trade disputes.
One of the most contentious issues is a U.S. proposal to do away with a part of the pact known as Chapter 19, which allows Canada and Mexico to appeal U.S. anti-dumping and anti-subsidy tariffs. The U.S. argues that these appeals compromise its sovereignty, while Canada has refused to entertain the idea of eliminating their ability to appeal decisions.
Canada has not been targeted as frequently by the United States’ anti-dumping and anti-subsidy tariffs as some other nations, notably China. But they often become major public issues in Canada and a significant source of irritation between the two countries.
Boeing’s recent success in obtaining duties of nearly 300 percent against a new jetliner made outside Montreal by Bombardier dominated Canadian news reports and parliamentary debate. It also prompted the government of Prime Minister Justin Trudeau to back away from a plan to buy fighter jets from Boeing.
The high profile of the disputes stems from a widespread sense among Canadians that the U.S. system is unfair and could have negative economic consequences. Most of the biggest disputes have involved industries, like forestry, that are the primary — or sole — employer in some regions of the country.
“You can equate it to a gold medal hockey game: Canada and the United States are playing, but all of the referees are from the U.S.,” said Andrea van Vugt, vice president for North American affairs at the Business Council of Canada, a group representing about 150 companies. “The Canadian government really has no choice but to stand up for Canadian industries on this.”