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Big month ahead for Canada U.S. trade

Multiple irritants come to a head in June


May 31, 2017
The Canadian Press
The Canadian Press

WASHINGTON—The multiple ways in which Donald Trump could threaten Canada-U.S. trade will be on full display this month, with a series of looming decisions and public events that hold the potential to escalate disputes.

One expert counts three pathways to pain: NAFTA negotiations, punitive actions, and pressure on CEOs to shift operations to the U.S.

Gary Hufbauer says this flurry of individual actions will allow the president to point to immediate results in his “America First” agenda, giving him something to show voters in the 2018 U.S. midterm elections if NAFTA talks languish into the following year.

“I think the NAFTA negotiations are going to be long, and tedious, and difficult, and not yield much fruit between now and the (midterms) in 2018,” said Hufbauer, a prominent trade analyst at Washington’s Peterson Institute.

“So…these other parts of the agenda will be what Trump emphasizes when we come down to the congressional and senatorial races.”

Lots is happening this month.

There are at least four actions on the punitive front that Canada will be watching in June: a report on Bombardier by the Commerce Department around June 12, which could lead to duties; a decision on additional softwood-lumber duties June 23; and investigations into the national-security implications of importing steel and aluminum, which Trump says will be released in June.

There’s also a big hearing on NAFTA on June 27. The U.S. government will collect public input on what it should demand in negotiations later this year, and foreigners are invited to share submissions for the Washington event.

The Canadian government is preparing for this multi-front challenge:

  1. On Tuesday, Defence Minister Harjit Sajjan came within a whisker of threatening the U.S. company that launched the complaint against Bombardier. Ottawa has said it is reviewing plans to spend at least $5 billion on Boeing Super Hornet fighter jets. Sajjan said in a speech: “(This) is not the behaviour of a trusted partner.”
  2. On softwood lumber, Ottawa is threatening two other trade actions. It says it might ban exports of U.S. coal from B.C., and is also studying whether the state of Oregon’s business subsidies constitute grounds for punitive action.
  3. On steel and aluminum, Prime Minister Justin Trudeau pushed Trump during a chat in Sicily for a Canada exemption from any punitive action. The countries have relatively balanced trade in steel. In fact, Canada is by far the largest importer of U.S.—it took in 51 per cent of U.S. exports last year, Mexico took 39 per cent, and the next four countries took a mere one per cent each.

The American cabinet official responsible for many of these trade actions is aware of this.

Commerce Secretary Wilbur Ross told a congressional hearing last week: “We actually have steel surplus with Canada and Mexico, so that puts them in a little different position, as well as the fact that they are participants in NAFTA.”

The Canadian government will keep taking its message on the road.

Transport Minister Marc Garneau will be in Pennsylvania steel country Friday as the latest cabinet minister to travel throughout the U.S., spreading the message about US$635 billion a year in bilateral trade of goods and services, the nine million U.S. jobs related to Canadian trade, and the US$1.2 million of trade occuring every minute of the day.

Garneau alone has been in Washington, D.C., Washington State, and Florida recently as the Canadian cabinet scours the continental United States is search of potential allies as these disputes arise.

“It’s just making our American neighbours aware of just how much is at stake,” Garneau said in an interview.

He’ll be meeting in Pittsburgh with two Republican congressman and with the head of the United Steelworkers union—Leo Gerard, who is Canadian. Gerard happened to be inside the Oval Office for the public event where Trump blasted Canadian trade in dairy, lumber, and energy.

But Garneau warns against getting too exercised by this daily noise.

He says he’s looking farther ahead, past June, at another big date: Aug. 16. That’s when the U.S. will have finished its NAFTA consultations and will be ready to present its demands to Canada and Mexico for the renegotiation.

“The vast majority of what we’re looking at will be under NAFTA,” Garneau said in an interview. “There’s a certain amount of stuff that gets out there in the media that may not necessarily be what the United States’ final position is…

“We know the art of negotiation. The real serious negotiations will be based on what is put on the table in front of us, three months from now. That’s what we will be focused on… That’s when the rubber hits the road.”

Buy American is another issue on the transport minister’s mind. Domestic procurement could be a key sticking point in the NAFTA talks, and also surface as an issue in an eventual U.S. infrastructure bill.

The last time it was a major irritant some Canadian companies responded by opening U.S. facilities.

That’s the third kind of pressure Hufbauer expects to see, beyond sector-by-sector penalties and NAFTA harball bargaining. He says Trump already has pressed CEOs of major companies, especially in the auto sector but in others as well, with one purpose: “Threatening them to locate in the United States.”

News from © Canadian Press Enterprises Inc. 2016