Remarks to the Standing House Committee on International Trade on the Potential Trade Impacts of the United States Inflation Reduction Act of 2022

House of Commons Standing Committee on International Trade
feat. Colin Robertson
December 13, 2022


In the fall of 2005, I was leading our advocacy team at our Washington Embassy. Softwood lumber was a top priority. Our ambassador, Frank McKenna, asked me when our troubles over lumber began. I called the Librarian of Congress and a couple of days later, he said their research showed that timber merchants in northern Massachusetts – what is now Maine – had successfully petitioned Congress during the second administration of George Washington to impose levies – tariffs – on New Brunswick timber sent to Boston to be used in shipbuilding.

The point of this story is to remind ourselves that Americans practising protectionism is as old as the Republic. And it will never change.

We are not usually the primary target of U.S. trade actions. A lot in the Inflation Reduction Act is aimed at countering China.  But the deeply integrated nature of our trade means that we become collateral damage, as with the Trump administration’s steel and aluminum tariffs.

Trade policy is even more complicated because it now involves climate, human rights, labour and environmental provisions. In the wake of the pandemic and the return of great power competition, national security is a dominant consideration. We must now secure and make resilient our supply chains through de-coupling, near-shoring and friend-shoring.

Security of supply now trumps comparative advantage.

We witness the return of national industrial policies, complete with incentives and subsidies, like those in the IRA.

For this reason, and this is my second point, our advocacy efforts with the United States must be a permanent ongoing campaign reminding Americans that reciprocity in trade and investment continues to benefit both nations.  

The U.S. is the market that matters most for all business, especially for those we are encouraging such as women and minorities.

Three-quarters of our exports – manufactured goods like auto parts or resources like lumber, oil and gas – go to the U.S. And with trade generating over sixty percent of our economy, access to the U.S. matters.

For thirty or more states, their biggest market is Canada. Our trade and investment generates nine million American jobs. Parsing this by state and by congressional and legislative district works because, just as all politics in the U.S. is local, so too is trade. 

Other witnesses have testified how a Team Canada effort helped us secure a level playing field for the production of electric vehicles. Our ambassador, embassy and consulates play a critical role. Having done this both in Washington and at consulates, our success also depends on a ‘Team Canada’ effort involving the prime minister, premiers, ministers, and members of parliament from all parties. All levels of government must be involved as well as business, labour and interest groups.

To level the playing field on U.S. protectionism we pursue various avenues.

We will continue to protest their incentives on battery production as discriminatory and contrary to their CUSMA and WTO trade obligations arguing, as we did in the case of the EV tax credit, that we should approach this on a continental basis.

We will remind the U.S. of our right to respond to discriminatory behaviour with trade sanctions. The threat of targeted sanctions helped persuade the U.S. to lift the steel and aluminum tariffs. But imposing counter-tariffs is also imposing a tax on our own consumers.

As this committee knows, there is pressure to match the American subsidies with subsidies of our own. We have done this before, but the cost is borne by the taxpayer.

Alternatively, we could agree with the U.S. on the use of incentives as we did recently on solar panels.

The ideal would be a continental industrial strategy, including Mexico.

Regardless, and this is my third point, we need to get our own act together by making the sectors that matter most to us as competitive as possible. 

There is lots of useful research from business, government and think tanks to draw on. Two stand out:  ‘Restart, Recover, and Reimagine Prosperity for all Canadians’ prepared by Canada’s Industry Strategy Council and the Senate Prosperity Action Group report Rising to the Challenge of New Global Realities.

To help implement and make practical their recommendations, we should reconstitute the sectoral advisory groups or SAGITs, that served us so well during the Canada-US FTA negotiations. Composed of business, labour, provincial government and civil society, they guided the negotiators with practical advice on what Canada needed, acting as sounding boards on what we could accept in negotiations.

To conclude: Advancing our interests with the U.S. is a permanent campaign, requiring a Team Canada approach with a clear focus on our objectives.

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