In The Media

No more Mr. Nice Guy: Ottawa invokes Plan B on trade with the U.S.

by Barrie McKenna (feat. John Weekes)

The Globe and Mail
January 10, 2018

It wasn't long ago when Ottawa's playbook on dealing with U.S. President Donald Trump was all about charm and influence.

Waves of officials traipsed down to Washington to make friends. Prime Minister Justin Trudeau cozied up to first-daughter Ivanka Trump. Others reached out to top U.S. officials, including Commerce Secretary Wilbur Ross and Treasury Secretary Steve Mnuchin. The Liberals even called on former prime minister Brian Mulroney (and Mr. Trump's occasional Florida neighbour) for advice.

Well, scratch that. Plan B is now in effect.

The Trudeau government has launched the trade world's equivalent of all-out war – a sweeping case that accuses the United States of flagrantly violating World Trade Organization rules in its handling of nearly 200 trade investigations going back decades.

Ottawa clearly hopes other countries will join its trade crusade. The filing – made in December, but only posted to the WTO website on Wednesday – lists U.S. investigations against most major WTO countries, including numerous involving China.

The timing is curious. The case comes just days before the start of the next round of already poisoned talks to renegotiate the North American free-trade agreement. While Mr. Trump and his entourage don't like NAFTA, they like the WTO even less, particularly for failing to rein in trade abuses by China.

"This is like setting off a bomb in a public square rather than using a rifle," points out John Weekes, Canada's former WTO ambassador and chief NAFTA negotiator.

Toronto trade lawyer Mark Warner questions the strategic value of "poking the U.S. in the eye."

"I understand the optics, but not the strategy," Mr. Warner says.

"This is just more of the same from the Minister of Global Affairs [Chrystia Freeland]. She's aggressive. She's assertive. We'll see whether it works for us."

The specifics of the Canadian case against the United States are highly technical. Among other things, Ottawa argues that the United States isn't playing by WTO rules in the way it collects and calculates duties in anti-dumping and subsidy cases, in how it treats evidence and the way in which the U.S. International Trade Commission makes rulings.

These historical grievances are a growing concern for Ottawa. In recent months, the United States launched investigations and moved to slap preliminary duties on several key Canadian exports, including newsprint, lumber, magazine-grade paper and Bombardier C Series aircraft.

"This is a response to the fact that the U.S. has pursued trade cases aggressively against Canada," says Matthew Kronby, a former Canadian trade negotiator and a partner at law firm Bennett Jones in Toronto. "This is Canada fighting back."

But it isn't just about the spate of duties against Canadian products. It's also about building a case that the United States is "systemically offside" WTO rules, according to Mr. Kronby.

"This case is really a culmination of frustration that has been mounting for a decade or more," he argues.

Indeed, previous Canadian governments tried for years to get the United States to stop filing anti-dumping and subsidy cases against its free-trade partners. Those concerns were largely ignored during several years of talks in the mid-1990s.

This time around the stakes are much higher for Canada. The Trump administration is stridently challenging NAFTA, the WTO and the global rules-based trading system that previous U.S. administrations helped create.

By dropping the gloves in such a public way, Canada is acknowledging that playing nice with Mr. Trump on trade has failed miserably. Far from appeasing the U.S. administration, Canada is facing punishing duties on billions of dollars' worth of exports and poison-pill demands that could soon kill NAFTA.

But it's still a risky gambit on Ottawa's part.

U.S. Trade Representative Robert Lighthizer called Canada's WTO case an "ill-advised attack on the U.S. trade-remedies system." Even if the case is successful, Mr. Lighthizer says it would hurt Canadian exports and workers by opening the floodgates to even more Chinese products in the North America market.

Ottawa may have decided that NAFTA is already doomed.

So it's casting itself as the saviour of the endangered global trading regime.

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