June 4, 2018

 

Canada unveils tariffs against US food products as US-Canada relation sours

 

 

The trade relation between US and Canada took a further hit as US President Donald Trump slammed Canada for its "restrictive" agricultural trade policies, while Canadian Prime Minister Justin Trudeau chided Washington for imposing its metals tariffs. 

According to The Wall Street Journal report, the latest development could exacerbate contentions in regards to the negotiation of revising the North American Free Trade Agreement (NAFTA). Trudeau had also stated "a turning point in the Canada-US relationship," following the implementation of the Trump administration's tariffs which could ignite a global trade war.

Additionally, Trudeau decried the rationale for the tariffs - purportedly based on national security concerns - as "inconceivable", as he revealed about US$12.8 billion in retaliatory tariffs on US goods - some targeting US food products.

Trump reiterated his hard-line stance on trade with his North American neighbors, raising the prospect of separate trade deals with Canada and Mexico rather than the existing NAFTA treaty.

Last week, Trump chastised Canada's agricultural policy on Twitter.
 

Canada "has treated our Agricultural business and Farmers very poorly for a very long period of time," Trump wrote. "Highly restrictive on Trade! They must open their markets and take down their trade barriers!"

 

Canada's agricultural policy was bound to be a flashpoint at some point during the NAFTA talks but has taken a backseat as the countries have focused on other matters, such as automotive rules of origin.

 

Trump's tweet taps into protracted frustrations in some US dairy states, namely Wisconsin and New York, over Canadian agricultural policy.

 

Under Canada's supply-management policy, the government sets prices for dairy products based on the average costs of production. Production is controlled through a regulated quota system, and foreign competition is thwarted through steep tariffs.

 

This is not the first time Trump has targeted Canada's dairy system. He criticised restricted access to the dairy markets last year, after Canada denounced a US move to place tariffs on Canadian lumber.

Trump added in his latest tweet that Canada runs "a really high surplus on trade with us."

However, a Trudeau spokesman cited a report from the Office of the US Trade Representative, which contradicted Trump's tweet. The report indicated the US recorded a goods-and-services trade surplus with Canada of US$8.4 billion in 2017.
 

Trump appears to be focusing on trade in goods alone, in which Canada recorded a surplus of US$17.5 billion last year, according to the same USTR report.

 

"We lose a lot of money with Canada," Trump told reporters last week.

Trudeau previously resisted overt criticism of Trump's policies, as he sought to conserve Canada's preferred access to the US market in the NAFTA talks. All that changed with the steel and aluminum tariffs, which the US imposed on Canada along with Mexico starting on June 1 amid stalled NAFTA talks. The tariffs also apply to the EU.

Despite the current bumps in US-Canada relation, some Canadian trade experts, such as Trudeau's former foreign-policy adviser Roland Paris, said they expected Trudeau to work toward avoiding further escalation of trade tensions due to the high stakes in the NAFTA talks.

"Trudeau's challenge with Trump has always been to strike a balance between defending Canadian interests and avoiding" an exacerbation of tension, Paris said.

Still, Canada had announced its first steps to launch a formal legal complaint with the World Trade Organization over US tariffs on steel and aluminum and would ask an independent panel under NAFTA's dispute-resolution system to rule on levies.
 

- The Wall Street Journal