Canada: America’s frustrated trade partner

by Colin Robertson

The Globe and Mail
June 9, 2015

What’s $3-billion? It’s the price that Canada will exact from the United States in reparations over the country-of-origin labelling dispute.

Armed with a World Trade Organization (WTO) ruling, Canada is threatening to slap retaliatory surtaxes of up to 100 per cent on U.S. products, including chocolates, wine and jewellery, cereal and orange juice, barbecues, stoves, swivel seats and mattresses.

Final WTO authorization will take some months. The tax goes into the national account. That’s small comfort to Canadians who will pay higher prices for those products, especially when our drooping dollar means that we already pay more for U.S. imports.

The country-of-origin labelling (COOL) dispute is rooted in U.S. protectionism – American ranchers who do not like competition from Canada and Mexico. Their lobbying of Congress resulted in COOL’s inclusion into the 2008 Farm Bill.

The rule defied the logic of North American livestock supply chains. For decades, U.S.-born cattle were sent to feed-lot alley in Alberta or south of the Rio Grande into Mexico and then returned to the United States for slaughter.

Canada and Mexico fought the measure in U.S. courts – without success – and through the WTO. Successive WTO rulings have sided with Canada and Mexico. It’s another reminder of the advantages that multilateralism provides to Canada. Through its rules-based institutions, multilateralism levels the playing field for small and medium nations against big countries.

The threat of retaliation has concentrated congressional minds and the Republican majority in the U.S. House of Representatives is moving to rescind the legislation. Canada and Mexico need to stay united and keep up the pressure on the U.S. to repeal COOL.

Congress also will soon decide the fate of President Obama’s Trans-Pacific Partnership (TPP). Mr. Obama’s request for fast-track authority, obliging an up or down vote in Congress on trade deals, has passed through the Senate. It now requires a majority in the House of Representatives.

Without fast-track authority, Canada and the other TPP partners won’t conclude negotiations. Why would we renegotiate the deal a second time with Congress, the cradle of special interests?

Any skilled negotiator holds their cards close until the final round. Canada has held out responding to the American request that we open to competition our heavily protected dairy, chicken and egg industries.

It should be an easy decision for Prime Minister Stephen Harper, for whom advancing freer trade is a government priority.

Reform of supply management is overdue. It is costly to the consumer and the industry should be able to compete internationally with the kind of adjustment assistance given, after the Canada-U.S. free trade agreement (FTA), to our now successful wine industry.

In bargaining the reform of supply management at the TPP table, we should push for better access for our forest products. We are likely to do better at the multilateral negotiating table, especially given the approaching expiration (October) of the current Canada-U.S. lumber agreement.

Lumber disputes with the United States predate Confederation. At U.S. insistence, lumber is managed through regional quotas. The lesson is twofold: diversify our markets while seeking improvements through multilateral agreements such as TPP.

Last week, Derek Burney, who as a foreign service officer persuaded Brian Mulroney to take the “leap of faith“ on the FTA, gave the O.D. Skelton Lecture in Ottawa’s Pearson Building.

Mr. Burney, who helped close the FTA deal when he was Mr. Mulroney’s chief of staff and later served as our ambassador to the United States, argued that we need to “recalibrate and counterbalance” the U.S. relationship. The United States is neither willing nor able to give us a “special relationship,” he said.

He declared that it is time for us to “exploit our strengths beyond North America.” This means a coherent, consistent strategy on China and repositioning our security role, especially in the Pacific. It also means putting our economic house in order. Mr. Burney warned against coasting on our resources and overreliance on the U.S. market.

Mr. Burney is persuasive. We should be opening doors to markets within the Pacific and Atlantic.

But the opportunities for trade within North America remain immense, especially as President Enrique Pena Nieto’s reforms make Mexico an even more attractive partner.

Three billion dollars is roughly the value of Canadian exports last year to India or Brazil. It’s also the value of what we export to the United States every 36 hours.

The disputes over lumber, labelling and pipelines are frustrating. They underline why we need to fully engage in trade negotiations and the insurance provided to us through muscular multilateralism.

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