Canada goes on attack in trade dispute with U.S.

WASHINGTON — Prepare for a tense moment in Canada-U.S. relations — with hard bargaining on NAFTA on the horizon prompting nervous glances at Donald Trump to see whether he cancels the agreement, all compounded by a bitter, wide-ranging trade dispute.

Canada launched a broad attack against American trade practices in an international complaint about the superpower’s use of punitive duties, eliciting a caustic counterswipe from the Trump administration when the document was made public Wednesday.

“(This is an) ill-advised attack,” U.S. trade czar Robert Lighthizer said. “Canada’s claims are unfounded and could only lower U.S. confidence that Canada is committed to mutually beneficial trade.”

Two weeks from now, the unstated backdrop to the dispute will be squarely in the foreground.

The countries will gather in Montreal Jan. 23-28 for a high-stakes round of NAFTA negotiations, with no additional talks scheduled beyond March. Canadian officials say they know full well that Trump could invoke NAFTA’s withdrawal clause during this January-March period.

Canada has launched a World Trade Organization complaint about the U.S. system for imposing punitive duties, alleging that they violate international law.

The complaint was launched in December but made public Wednesday — the very day, coincidentally, that the U.S. announced its latest trade action against Canada. The U.S. is imposing duties of up to nine per cent on Canadian paper, following penalties against Bombardier and softwood lumber producers, over what the U.S. alleges to be unfair Canadian trade practices.

Canada is now arguing that the entire American process for imposing anti-dumping and countervailing duties violates global trade rules. It cites five reasons, saying the U.S. levies penalties beyond what’s allowed by the WTO, improperly calculates rates, unfairly declares penalties retroactive, limits evidence from outside parties, and has a tilted voting system in domestic trade panels that, in the case of a 3-3 tie, awards the win to American companies.

The complaint holds global consequences. Canada cited 122 cases where the U.S. unfairly imposed duties on foreign countries, not just Canada.

“It’s (saying), ‘The entire way in which the U.S. — you — are conducting your antidumping, countervailing procedures, is wrong,”” said Chad Bown, a trade expert at Washington’s Peterson Institute and host of the podcast “Trade Talks.”

This is effectively Canada bringing a dispute on behalf of all exporters in the world — the Europeans, Japan, China — because they’re making a systemic challenge.”

Some critics questioned the timing.

Edward Alden of the Council on Foreign Relations called it a precarious moment for NAFTA and the global trading system, both of which are under threats and criticism from Trump: “Canada has just detonated a bomb under both.”

Indeed, the Trump administration wasted no time expressing its displeasure. In a statement, Lighthizer not only criticized the move but said it was self-defeating for Canada, too, since if it succeeds, low-cost producers could start dumping product onto the U.S. market, squeezing out Canadian competition.

“The flood of imports from China and other countries would negatively impact billions of dollars in Canadian exports to the United States, including nearly US$9 billion in exports of steel and aluminum products and more than $2.5 billion in exports of wood and paper,” he said.

“Canada’s complaint is bad for Canada.”