US-Canada trade tensions rise ahead of NAFTA talks

US-Canada trade tensions rise ahead of NAFTA talks

The two countries are currently locked in contentious talks over a NAFTA reboot.

Just days before the sixth round of talks to renegotiate the North American Free Trade Agreement (NAFTA) get underway in Canada, full details have emerged of a wide-ranging complaint made by the Canadian government against the U.S. before the World Trade Organization (WTO) in December, challenging Washington’s use of anti-dumping and anti-subsidy duties.

The two countries, along with Mexico, are currently locked in contentious talks over a NAFTA reboot, the penultimate round of which are to begin in Montreal, Jan. 23, and with this latest move by Canada, tensions could reach boiling point.

The 32-page complaint filed by the Canadian government targets various aspects of U.S. trade policy from export controls and the use of retroactive duties to decision-making tactics utilized by the U.S. International Trade Commission (ITC), and also cites cases relating to several of Canada’s trade partners, such as China, India, and the EU.

In a public statement, Canadian Foreign Minister Chrystia Freeland cited the motive for the complaint as a longstanding dispute between the two countries, which began in the 1980s, over the softwood lumber industry. Canada has long accused the U.S. of imposing unwarranted duties on its lumber exports while the U.S. says it has been hurt by Canadian subsidies and dumping practices. In December, the ITC voted to uphold duties on Canadian softwood lumber.

Yet the decision by Canada to pursue the complaint appears much more likely to be a pre-emptive strike ahead of the resumption of NAFTA talks in two weeks time. Both Canada and Mexico continue to fear that U.S. President Donald Trump may look to withdraw his country from the agreement as he seeks to pursue a protectionist, “America First” trade policy.

Initially, it seemed that Trump was simply playing hardball with the U.S.’s neighbors on the way to agreeing a revamped trade pact that would please all three members. Yet, earlier this week, Canadian government officials told Reuters they were increasingly convinced that Washington will pull out of the negotiations.

Nevertheless, others believe that Trump, who famously dubbed NAFTA the “worst trade deal… maybe ever” on the campaign trail in 2016, is simply bluffing having threatened to pull out of the talks on several occasions before. Furthermore, any withdrawal by the U.S. would require a non-binding six-month notice period and approval by Congress which is currently largely pro-trade.

As Canadian journalist Terence Corcoran wrote in The Financial Post Wednesday, “We have seen that [Trump] likes to play a rough game on the way to a deal. To be optimistic for a moment, let us assume that Canada is now doing the same.”


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Paul Imison
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