Author Archives: Lawrence Herman

GLOBE & MAIL

31 May 2018

LAWRENCE L. HERMAN © 2018

Former Canadian diplomat, practices international trade law at Herman & Associates and is a Senior Fellow of the C.D. Howe Institute in Toronto.

The Trump administration’s announcement of punitive tariffs on Canadian steel and aluminum yesterday means we’re into a full-blown economic and political war with the Americans.

The Prime Minister’s tough statement yesterday [30 May 2018] that these tariffs are unacceptable and an affront to all Canadians is unprecedented for its direct and un-restrained criticism of an American president and his administration by any Canadian leader. In answering the press, the PM said that Mr. Trump’s actions represent a “turning point” in Canada-US relations.

The descent into full-scale economic warfare with the Americans had been evident for some time, notwithstanding overly-optimistic comments by some observers dismissing Trump’s periodic threats and fits of rage against Canada (and Mexico) as just so much bombast. Some bombast.

It’s no surprise that Trump would use tariffs as his weapon of first choice, recalling his bellicose inaugural address with its unapologetic “America First” chant. Tariffs are easy to apply, especially if you disregard treaty obligations, can be designed to appease domestic constituencies and inflict maximum pain on foreign trading partners

The duties will have an immediately negative impact on Canadian steel and aluminum industries, forcing production cutbacks and threatening thousands of Canadian jobs.

Added to this Mr. Trump’s threat to target Canadian auto imports down the road.

The Canadian counter-measures announced yesterday have been designed surgically with the same pain-inflicting objectives, even if Canada’s relative economic size means Canadian surcharges won’t inflict the same level of absolute discomfort on the American economy. Nevertheless, Canada has little choice but to go down that road.

All of this heralds a long, bitter and painful battle with the Americans and ominously darkening relations on a scale broader than tariffs, a destabilizing and destructive situation unprecedented in over 150 years of shared history.

There have been periods of tense political relations between the two countries before. There was Kennedy’s intense dislike of Diefenbaker and the then Conservative government’s refusal to accept nuclear-armed missiles. There was tension with the Johnson and Nixon administrations during the Vietnamese war. George W. Bush was angered when Paul Martin backed out of shared North American missile defense at the last hour.

These earlier episodes can be chalked up to bilateral irritants and divergent interests that emerge from time-to-time in a complex relationship. But these were of an order materially different from the open anti-Canadian hostility, contempt and disregard exhibited by the White House today.

Canada of course isn’t alone at being targeted by Mr. Trump’s protectionism. Yesterday’s actions are part of an American trade strategy aimed at adversaries and allies alike, the EU included, grounded in Mr. Trump’s xenophobic world view, aided by the likes of Messrs. Bolton, Navarro and Lighthizer.

Beyond American bilateral relationships, actions by the Trump administration denigrate the multilateral rules-based system and disregard US obligations under that system, however the White House tries to dress these with a degree of justification. Foreign Minister Freeland repeatedly described the duties as illegal, which is correct.

Recourse to rarely-used WTO national security exceptions is only permitted in time of war or other international emergency, a term that requires objective fact, not some unbridled right of unilateral declaration. Using the guise of national security, as Freeland has said, is “specious and unprecedented” in trade law terms.

Mr. Trump is pillaging the temple of the global trading system so painstakingly constructed over decades, largely as a result of US pressure – sometimes more benignly and ironically described as American leadership.

Where we go from here? In the immediate term, Canada will proceed to retaliate with its own surcharges against $16 billion with of US imports, as the PM stated. We will need steely (forgive use of the word) resolve and steadfast political will at all levels as we move down this perilous path.

Turning to the NAFTA negotiations, there’s no doubt the American actions have jeopardized any residual amount of good will at the negotiating table, an element requisite to cementing any mutually-agreed trade deal. The NAFTA exercise thus could be irredeemably harmed by this latest US move.

Should negotiations be suspended, whether the three countries can get back to the table will be an open question. This leads to the possibility of Trump triggering the US intent to withdraw, compounding the increased political and commercial uncertainties facing Canadian business.

As to broader political matters, the conduct of neighbourly relations with the US under these unprecedented circumstances (a term used by the PM several times during his press conference) will be challenging. By turning aside all of Canada’s representations, Trump and his cohorts have jettisoned the idea that allies are important, especially ones that have been as remarkably steadfast as Canada for over more than 150 years.

It will require teeth-clenching and diplomacy of the highest order for Canada to maintain any semblance of a decently friendly relationship with Washington over the remaining years of the Trump administration.

At the same time, Canada needs to be armed and girded for the vicissitudes of trade and economic war with our largest trading partner, because that’s where we’re heading.