Liberal government heading for revived trade spat with U.S.

OTTAWA — The Canadian government could be edging toward a revived trade spat with the U.S., after America’s top trade advisor accused Canada of “shading” its dairy obligations and breaking agreements over aluminum exports.

Renewed trade rifts with the U.S. come just days ahead of a key deadline for the U.S.Mexico-Canada Agreement (USMCA), which comes into force July 1 and replaces the former North American Free Trade Agreement (NAFTA).

The two countries have enjoyed a year of relative calm on the trade front, after agreeing in mid-2019 to remove tariffs on steel and aluminum and finally ending years-long negotiations over USMCA. But comments last week from U.S. Trade Representative Robert Lighthizer suggest that relationship is beginning to sour once again, after the Trudeau government introduced new dairy quotas that Lighthizer said could be purposely skirting international trade obligations. Those tensions add to a separate spat over aluminum supplies, in which the U.S. has threatened to re-impose tariffs on Canada.

James McIlroy, a trade consultant who works with the International Cheese Council of Canada (ICCC), said the recent moves by Ottawa exposes a “two-faced foreign policy” that has long frustrated its international trading partners, who claim they are unfairly and routinely cut out of the Canadian market. He said a revived spat with the U.S., if left unresolved, could threaten to hamper Ottawa as it looks to climb out of a deep economic slump caused by the COVID19 pandemic.

“It almost seems like the Trudeau government is sleepwalking into this,” he said.

Concerns have persisted for decades over Canada’s protection of its dairy industry, and came up in a review launched by European trade partners under the Comprehensive Economic and Trade Agreement (CETA).

“There’s a concern in the international community that the Trudeau government is signing agreements and then not respecting them,” McIlroy said.

Lighthizer took issue with Canadian trade policy in a Senate committee hearing last week, where he blasted quotas for cheese, milk and poultry, while also blaming Canada for a recent influx in U.S. aluminum imports.

International Trade Minister Mary Ng on June 15 published updated guidelines for allocating so-called trade tariff rate quotas (TRQs) for a range of dairy products. The updated TRQs allocated 85 per cent of some cheese quotas to Canadian processors, for example, which effectively hands the bulk of the market to three entities: French multinational firm Lactalis, Montreal-based Saputo, and the dairy organization Agropur Coopérative.