Canada’s options limited as it faces prospect of US trade war
OTTAWA/ WINNIPEG: From cherries to wine and oil, Canada has a range of tools to retaliate against any Trump administration trade attacks but they are either too limited or too painful to invoke.
Ottawa is keen to avoid a costly trade war with the United States as NAFTA renegotiations loom, given the US economy is ten times larger than Canada’s.
Cutting off energy exports is an option so fraught with risks – Canada is the largest supplier of energy to the United States – that Ottawa has never discussed it seriously.
Meanwhile, hitting back on US imports of goods like cherries and office chairs may have too little impact, leaving Canada with limited leverage.
US President Donald Trump’s administration has suddenly ramped up its attacks on Canada, imposing tariffs on softwood lumber and vowing to take action against what it calls unfair practices by Canadian dairy farmers.
Trump last week also said Canadian energy was another example of a bad trade deal for the United States, but gave no specifics or evidence.
Canadian officials played down the tariffs as disappointing, just one part of an otherwise successful trade relationship, even though Canadian government ministers have fanned across the United States selling the virtues of bilateral trade.
“There are no victors in a trade war,” Scott Brison, a senior Canadian cabinet member, said by phone from Detroit.
A senior Canadian political source said Ottawa would not for now be changing its approach despite Trump’s harsher tone. “This is a classic pre-negotiating tactic. It’s in his book,” said the source, who requested anonymity because of the sensitivity of the situation.
Both softwood lumber and Canada’s system of protections for its dairy industry were kept out of the initial North American Free Trade Agreement in 1994, making it easier for the United States to raise them now without having to wait for formal negotiations.
Top officials, noting that international trade authorities have always ruled in Canada’s favour in the long dispute over softwood lumber, say Ottawa will fight back against the tariffs and win again.
Ottawa will consider all options, including a World Trade Organization or NAFTA challenge, and help companies and workers who lose their jobs because of the US move.
In a sign of where the United States might strike next, international trade lawyer Mark Warner said Washington had asked to be granted observer status in a case Brazil opened in February against Canada at the WTO, over allegations of unfair subsidies to planemaker Bombardier Inc.
“I have noticed more and more people mentioning that in the United States and people don’t tend to mention things randomly,” Warner said by phone.
Any US action on planes would, like dairy and lumber, take place outside the process of NAFTA, which also includes Mexico.
The process of bringing disputes to NAFTA or the World Trade Organization can take years, and Washington tends to challenge the rulings, dragging out the pain for domestic producers hit by tariffs.