Trade Retaliation

Maple syrup from Vermont and perhaps California wine may be on Ottawa’s hit list in response to U.S. President Donald Trump’s proposed tariffs on steel and aluminum.

Lisa Rathke/The Associated Press

Canada will need to either bend or break international trade rules to take quick retaliatory action should the United States slap hefty tariffs on Canadian-made steel and aluminum, but experts say Ottawa has been forced into this position by an exceptionally protectionist White House.

Canadians should expect to pay more for iconic U.S.-produced goods if a trade war breaks out. Ottawa could slap import charges on goods from California wine to Vermont maple syrup – the sort of items that Canada has targeted in previous trade conflicts with Washington.

Canada has not released any lists of products – and the Trudeau government is staying mum on possible retaliation while it continues to seek an exemption from the Trump action. But experts suggest looking back at past trade spats with the United States – such as a 2014 dispute over meat labelling – to see what Canada has been prepared to hit.

Canada will be in good company in this trade fight, however, because more than 20 other countries or trading blocs will be taking similar countermeasures.

The European Union has already outlined a list of U.S. exports it would target after President Donald Trump said he will levy a tax of 25 per cent on imported steel and 10 per cent on aluminum.

U.S. President Donald Trump told a joint news conference that he still backs the idea of adding tariffs to steel and aluminum imports, linking them to a new NAFTA deal. Trump said he will straighten out trade in a “loving, loving” way.

Normally, Canada is supposed to seek retaliatory authority from the World Trade Organization to impose countermeasures on foreign countries but this process can take years. But, unlike past quarrels with the United States, Canada will be hard-pressed to act immediately – regardless of what the rules say.

“I don’t believe any countries affected by these tariffs will wait for WTO procedures to be completed before acting,” international trade lawyer Lawrence Herman said.

“Politics will drive this. Governments, including Canada, will be forced to respond immediately. That’s the dangerous precipice we’re facing, thanks to Mr. Trump.”

Colin Robertson, a former Canadian diplomat, writing in The Globe and Mail, says Canada and other countries threatened by the Trump tariffs should be drawing up a common list of U.S. exports that they could target with retaliatory action.

The EU has already warned it plans to target key Republican leaders with import taxes on items such as Kentucky bourbon – a product from the home state of Senate Majority Leader Mitch McConnell – as well as cranberries and dairy products from Wisconsin, home to House Speaker Paul Ryan.

Mr. Trump threw cold water on hopes for a Canadian exemption this week when he warned Canada would not be spared unless it agrees to U.S. demands for changes to the North American free-trade agreement – a series of protectionist U.S. requests that both Ottawa and Mexico City have characterized as unreasonable.

He said Tuesday that the tariffs will be applied in a “loving way.”

Mr. Ryan, the most powerful member of the U.S. House of Representatives, said the proposed tariffs are too broad and open the country to possible retaliation. Mr. Ryan named China, rather than Canada, as a problem.

The steel tariffs will be raised Wednesday at a meeting between auto industry leaders and officials in Prime Minister Justin Trudeau’s office, said Jerry Dias, president of Unifor, who will attend the meeting.

Auto industry executives sought the meeting to urge Mr. Trudeau to halt Canada’s participation in the Trans-Pacific Partnership trade agreement, which will eliminate Canada’s 6.1 per cent tariff on vehicles imported from Japan.

One U.S. trade expert estimates the annual cost to Canada of the steel and aluminum tariffs could be US$3.2-billion. Chad Bown, a trade adviser to former president Barack Obama, wrote in an article for the Peterson Insitute for International Economics that this amount would be roughly what Canada could justifiably expect to seek compensation for in retaliatory action against the United States.

Former Canadian government officials have said it’s very difficult to pick retaliatory targets. In 2005, when Canada was angry at a U.S. law that funnelled cash collected from tariffs on foreign goods to U.S. companies, Ottawa drew up a list that targeted the states where U.S. politicians voted for the legislation. In that case, Ottawa was forced to abandon some retaliatory targets – such as U.S. motorboats – because of push-back from Canadian industry. Its final list was narrowed down to a few items, such as tropical fish.

Laura Dawson, director of the Canada Institute at the Wilson Center in Washington, said Canada’s best bet to head off the tariffs may be to wait for the U.S. system of checks and balances to run its course, including a likely court challenge of steel tariffs by companies that buy steel.

“People are already talking about how court challenges will be launched, what would the courts be asked to adjudicate; would they be asked to adjudicate what constitutes a national security threat?” Ms. Dawson said.

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Ballistic Missile Defence

Ottawa examines merits of U.S. missile defence program

Steven Chase

OTTAWA — The Globe and Mail

Monday, May. 12 2014

The governing federal Conservatives appear to be trying to gauge the Canadian public’s appetite for joining the U.S. ballistic missile defence program, defence watchers say.

Conservative-dominated committees in both the Senate and Commons are examining the merits of the U.S. missile defence program, which former Liberal prime minister Paul Martin opted against joining in 2005. Both committees are studying broader security matters but have been hearing witnesses on missile defence as part of their research.

The Conservative government is saying little. A spokeswoman for Defence Minister Rob Nicholson repeatedly declined to answer whether Ottawa is considering changing Canada’s policy on missile defence.

Johanna Quinney, press secretary to Mr. Nicholson, would only say the policy is still intact.

“No decision has been made to change this policy. We will continue to monitor international developments and ensure the safety and security of Canadians both at home and abroad,” Ms. Quinney said.

The minister’s office said it looks forward to what the Senate’s national security and defence committee report will say on the U.S. missile defence program.

James Bezan, the parliamentary secretary to the Minister of Defence, told a defence summit last week that Ottawa “hasn’t made any decision” on the matter.

Last Thursday, Agence-France Presse reported Mr. Bezan saying there is concern about the “accuracy” of missiles being developed by some rogue countries that could target Canada’s neighbour, the United States, and end up striking Canada. In the same comments, the parliamentary secretary expressed concern that under the current arrangement Canadian officials would be “sidelined” in the decision-making on the response to any missile threat incoming to North America.

Colin Robertson, a former Canadian diplomat who recently testified in support of joining the U.S. missile defence program, said he believes the Conservative government is weighing this during a promised review of Ottawa’s defence strategy.

He said the United States isn’t pushing Canada to join but that Ottawa is concerned about the rising threat from countries such as North Korea.

“I think the government is testing the waters to see whether the conditions are right,” said Mr. Robertson, vice-president of the Canadian Defence & Foreign Affairs Institute.

He called the missile shield an “insurance policy” and said it “makes a lot of sense.”

David Perry, a senior analyst with the Conference of Defence Associations Institute, who also supports joining the U.S. system, said he thinks many of the 2005-era arguments against ballistic-missile defence have been proved immaterial. He thinks Ottawa is curious whether Canadians agree.

“I kind of get a sense they’re floating a trial balloon,” Mr. Perry said.

Philip Coyle with the U.S. Center for Arms Control and Non-Proliferation, testified against Canada joining the U.S. program at Senate hearings Monday.

He said U.S. missile defences remain ineffective. “Shooting down an enemy missile going [24,140 kilometres per hour] out in space is like trying to hit a hole-in-one in golf when the hole is going [24,140 kilometres per hour],” he said. “The hardware being deployed in Alaska and California has no demonstrated capability to defend the United States, let alone Canada, against enemy missile attack under realistic operational conditions.”

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