Canadians shouldn’t let their hatred of Trump blind them into stumbling into a full-out trade war with the United States, says an American expert on international trade.
Marc Busch, professor of International Business Diplomacy at the School of Foreign Service, at Georgetown University, says Canadians should remember that the tariffs on Canadian steel and aluminum, imposed by the Trump administration under the guise of national security concerns, are as unpopular in the U.S. as they are in Canada.
“It’s important for Canadians to realize that Trump 232 tariffs are under challenge by domestic U.S. constituents in domestic U.S. courts and in the U.S. Congress itself,” Busch said in a phone interview from Washington D.C. “Everyone is feeling the pain and, generally speaking, that’s what happens in a trade war.”
(click to listen to the full interview with Marc Busch)Listen
Canada responds ‘in sorrow, not in anger’
The federal government unveiled an updated list of U.S. products last Friday subject to Canadian retaliatory tariffs as of July 1 while also pledging to spend up to $2 billion to protect Canada’s steel, aluminum and manufacturing industries and workers.
Foreign Affairs Minister Chrystia Freeland revealed the final list of $16.6-billion worth of retaliatory tariffs on a wide range of U.S. products, including steel and aluminum at an event at a steel factory in Hamilton, Ontario.
“I cannot emphasize enough the regret with which we take these countermeasures,” Freeland said, speaking at the Stelco steel plant. “We are acting very much in sorrow, not in anger.”
There are a lot of constituents on both sides of the border that are very unhappy with the situation, said Busch, who grew up in British Columbia and has taught at Queen’s University in Ontario.
“It really is important to indicate that the opposition within the United States – never mind the opposition to the United States – is formidable and is currently playing out both politically and legally,” Busch said.
Asymmetrical trade warfare?
However, what he really worries about is the idea floated in a recent op-ed article published in Maclean’s magazine by Ottawa-based law professor Amir Attaran, said Busch who also produces a new podcast dedicated to international trade.
Instead of engaging in tit-for-tat dollar-for-dollar retaliations against the American Goliath, as Ottawa has done so far, Attaran is suggesting Canada engage in asymmetrical trade warfare and threaten to suspend U.S. pharmaceutical patents.
“Six of the world’s top ten pharmaceutical companies are American,” Attaran writes. “No industry throws more lobbying dollars around Washington—more than the banking, defence, and automobile industries combined. Any trade retaliation aimed at pharmaceuticals certainly will be felt on Wall Street and heard in the White House.”
Canada has already expropriated pharmaceutical patents in the 1970s and 1980s, but stopped because of the 1988 Canada-U.S. Free Trade Agreement, the precursor to NAFTA.
“Now that the White House wants to back out of our trading relations and NAFTA too, it is fair to revisit that decision,” Attaran writes.
‘Unshirted hell’ to come
That would be a huge mistake, says Busch.
“It would be an unmitigated disaster and would be WTO-illegal,” Busch said. “And at the time when Canada is front and centre on Special 301 Priority Watch List of the United States to begin to suspend American patents on drugs would invite unshirted hell from not only from this administration but any U.S. administration.”
In April, the Trump administration labelled 36 countries as inadequately protecting U.S. intellectual property rights, keeping China on a priority watch list and adding Canada over concerns about its border controls and pharmaceutical practices.
A move by Canada on suspending U.S. pharmaceutical patents, motivated by a “blinding” hatred of Trump, would bring NAFTA negotiations to a halt and would undoubtedly invite massive reprisals backed by the U.S. electorate in a very big way, Busch said.
Focus on reviving TPP and TTIP, not NAFTA
At the same time Busch thinks that the U.S., Canada and Mexico should focus more of their energies on the Trans-Pacific Partnership rather “than try and rebirth a NAFTA 2.0.”
Canada and 10 other Pacific nations signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in March, after President Trump pulled out the U.S. from its previous version known as the Trans-Pacific Partnership (TPP).
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But a TPP revival in its original 12-state format would happen only if Trump decides to bring the United States back into the fold and starts seriously exploring the possibility of concluding a free trade deal with Europe similar to the Canada-EU Comprehensive Economic and Trade Agreement (CETA), Busch said.
“My hope is that, yes, negotiations in that direction would be the answer not only of Canada-U.S. relations but also the EU-U.S. relations,” Busch said.
There are growing demands for jump-starting the Transatlantic Trade and Investment Partnership (TTIP) by the European carmakers who are concerned by the disruption of the potential 232 tariffs on the auto industry, Busch said.
“One way or another, with or without litigation, with or without retaliation, a negotiated settlement has to be struck,” Busch said. “And the best venue for that would be firming up the rule of law and a trade deal that is deep and encompassing.”