When it comes to tariffs, tit-for-tat the only game in town
At the end of the House trade committee’s meeting with Chrystia Freeland on June 19, Randy Hoback, a Conservative Member of Parliament from Saskatchewan, used a procedural manoeuvre to force a vote on adding to the panel’s pre-Summer workload.
He wanted to schedule a couple of two-hour meetings next week to hear from some of the men and women who will be caught in the middle of Prime Minister Justin Trudeau’s tit-for-tat trade war with U.S. President Donald Trump. “Maybe they will have some other ideas on other alternatives to stand up for them without it actually being a tariff,” Hoback said.
Pfft, said the Liberal majority. Hoback and three other Conservatives were in favour, as was the New Democratic MP; all six Liberal in attendance were opposed.
“That settles that,” said Mark Eyking, the Liberal MP from Nova Scotia and the committee’s chair.
Remarkably, Canada is about to join a trade war it can’t win without any public debate over whether there was another option.
Freeland, the foreign affairs minister, and Trudeau said within hours of Canada losing its exemption from U.S. steel-and-aluminum tariffs at the end of May that the Canadian government would retaliate in kind.
They gave importers a few weeks to review the list of U.S. goods they intended to tax starting July 1, but they asked for no input on the overall strategy.
“Canada had no other choice but to retaliate,” Freeland said in French at an event hosted by the Montreal Council on Foreign Relations on Wednesday.
But of course the government had a choice.
It could have litigated the U.S. duties at the World Trade Organization, as it is doing, without applying retaliatory tariffs. That might have minimized the disruption to overall trade and commerce.
Trudeau could have negotiated an export quota, like South Korea and some others did, and like Canada has done in the past to bring peace in its decadesold spats with the U.S. over lumber. Companies would at least have some clarity, and the limits on supply likely would raise prices.
Canada’s leaders also could have accepted one of the changes Trump wants to the North American Free Trade Agreement to ensure Canadian metal continues to flow south at a time of high demand.
Or maybe no alternatives were available and a trade war was the only option? We won’t know, because the government won’t talk about it, at least not in a way that yields real information.
“Obviously there is always a choice,” Freeland conceded at a press conference after her speech in Montreal.
She used her next breath to get back on message.
“Based on our absolute commitment to defending the national interest, to defending the rules-based international order, and to standing up for Canadian values, in this instance, there truly was no other option,” she said. “I think that is evident in the degree to which there is national solidarity around the path our government has taken.”
Political unity against a historically unpopular American president isn’t proof that retaliatory tariffs are the right move. I doubt Andrew Scheer, the Opposition leader, or Doug Ford, the Ontario premier-designate, had done a careful economic analysis before they decided to stand “shoulder to shoulder” with a prime minister they spend most of their time mocking.
Hoback’s intervention at the trade committee might have been gamesmanship — everyone knew the House was set to recess for the summer. Yet it was a rare suggestion from a Canadian politician — or any Canadian, for that matter — that maybe there is a reason that small, open economies like ours tend to avoid direct confrontation with the behemoths on which they depend to buy their goods and services?
During her testimony, Freeland revealed that the government had received more than 1,000 submissions from the public on its list of tariff targets.
Maybe some of those were letters of support: Go get ‘em!
But most will be appeals to Trudeau and Freeland to please target someone else’s favourite U.S. import. The government insists that its retaliation plan will result in minimal collateral damage, but there will be no avoiding it in a trade zone as intertwined as the North American one.
Freeland did provide a little insight on the government’s thinking.
The forestry industry is at least as important as steel and aluminum, but when the Trump administration tagged Canadian lumber imports with duties last year, the Trudeau government didn’t retaliate with duties of its own. That’s because the lumber duties were imposed through normal channels, while the metals tariffs were applied under the guise of national security, which “is simply illegal,” Freeland said.
She also noted Canada’s response is permitted under the rules of the WTO, and that the European Union and Mexico were doing it too.
“This is the approach that we have taken hitherto, and it will be our approach going forward,” Freeland told reporters. “Canada will not escalate, and Canada will not back down when we face illegal and unjust measures, we will respond.”
That settles that.
OPEN ECONOMIES LIKE OURS TEND TO AVOID DIRECT CONFRONTATION.