U.S. Trade Representative Robert Lighthizer speaks during a meeting hosted by U.S. President Donald Trump with governors and members of Congress at the White House in Washington, U.S., April 12, 2018. (Kevin Lamarque/REUTERS)

U.S. fires back with WTO challenge against Canada’s retaliatory tariffs

The United States launched a formal challenge with the World Trade Organization Monday against Canada’s retaliatory tariffs on a long list of U.S. products, arguing Canadian countermeasures breached international trade law and were “designed to punish American workers, farmers and companies.”

The federal Liberal government introduced $16.6-billion worth of countermeasures on imports of American steel, aluminum and consumer products earlier this month after the White House slapped Canada and others with tariffs on steel and aluminum.

Foreign Affairs Minister Chrystia Freeland has called Washington’s metal tariffs absurd and illegal because they’ve been applied on the premise that Canada represents a national security threat to the U.S.

The U.S. took a fresh step Monday in the trade fight by filing separate disputes at the WTO against Canada — as well as the European Union, China, Mexico and Turkey — over each jurisdiction’s set of counter-tariffs on imports of American goods.

“The actions taken by the president are wholly legitimate and fully justified as a matter of U.S. law and international trade rules,” U.S. Trade Representative Robert Lighthizer said in a statement.

“Instead of working with us to address a common problem, some of our trading partners have elected to respond with retaliatory tariffs designed to punish American workers, farmers and companies.”

Canada’s counter-tariffs breach WTO rules, trade expert

Chrystia Freeland, Minister of Foreign Affairs, visited Stelco in Hamilton on Friday, June 29, 2018 where she met with employees in the cold rolling plant and announced the government’s latest efforts in response to US tariffs on Canadian steel and aluminum. (Peter Power/THE CANADIAN PRESS)

Marc Busch, professor of International Business Diplomacy at the School of Foreign Service, at Georgetown University, said Canada’s and the EU’s counter-tariffs do in fact breach WTO rules.

Under the WTO rules a complaining country – in this case Canada – would file a dispute and efforts to resolve the dispute would begin immediately in a 60 day period of consultation, followed by litigation before a panel and possible appeal, Busch said.

Were the defendant – in this case the U.S. – found to be in violation of WTO law, there would be a set period of time in which the defendant could bring its measures into accordance with its obligations, he said.

Were that not done, the complaining country could ask for authorisation to retaliate against the U.S. by suspending concessions to a set level of trade value determined by the WTO, Busch said.

“But that’s not what’s happening here, instead we’re somewhat caught between what might be thought of as a 1930s style trade war and a truly legal trade war, meaning that it’s not unconstrained retaliation,” Busch said.

“But the decision by Canada and the European Union to implement retaliatory tariffs before the WTO has ruled against this application or against the legislation itself on Section 232 is legally speaking premature.”

(click to listen to the interview with Marc Busch)

Section 232 is not a safeguard

A coils of steel is moved by a crane at the Direct Strip Production Complex at Essar Steel Algoma in Sault Ste. Marie, Ont., on Wednesday, March 14, 2018. (Justin Tang/THE CANADIAN PRESS)

Busch said Canada and the EU have creatively redefined the tariffs imposed under the guise of national security concerns under Section 232 of the Trade Expansion Act of 1962 as a safeguard, one of the three trade remedies allowed for under the WTO – antidumping duties, countervailing duties and a safeguard.

Imposing antidumping and countervailing duties, both of which Canadians are very familiar with because of softwood lumber, requires that there be a determination of material injury to a U.S. firm given either selling below fair market value or benefiting from unfair subsidy abroad, Busch said.

“A safeguard has a lower bar to clear because you don’t have to establish material injury, you just have to establish a threat of material injury,” Busch said. “But the catch is that the country invoking the safeguard has to compensate the country targeted by the safeguard.”

What Canada and the EU are arguing is that the U.S. never compensated for using a safeguard, Busch said.

“That’s creative but the truth is that Section 232 is not a safeguard and while it may ultimately fall on its face under litigation, the truth is that Canada knows it’s not a safeguard because Canada’s case challenges Section 232 as such,” Busch said.

“They are not even questioning the application of 232, they are questioning 232 itself and that’s a dead giveaway that Canada is fully aware that whatever it is Trump thinks he’s done, it is not a safeguard. And if it’s not a safeguard Canada should not be invoking retaliatory tariffs.”

Last month, U.S. Commerce Secretary Wilbur Ross said the U.S. tariffs against Canada and other allies were designed to force them into action to address the world’s overproduction and overcapacity of steel.

Freeland has insisted that Canada introduced stronger safeguards on steel well before the U.S. imposed the tariffs.

On this front, Ottawa feels it has more work to do. The federal government has said it’s consulting with industry so even more can be done to address the diversion and dumping of aluminum and steel in the Canadian market.

‘Measured, perfectly reciprocal’

On Monday, a spokesman for Freeland defended Ottawa’s retaliatory duties.

“This is a measured, perfectly reciprocal, dollar-for-dollar response to the US tariffs — within our WTO and NAFTA rights,” Adam Austen, Freeland’s press secretary said in an emailed statement.

It is absurd to view any trade with Canada as a national security threat to the U.S., he said.

“The tariffs imposed by the United States on Canadian steel and aluminum are unacceptable and illegal,” Austen said.

With files from The Canadian Press

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