Washington Insider - Friday

Canada Challenges US Tariffs in WTO Case

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Canada Launches WTO Dispute over US Trade Remedy Measures

A World Trade Organization (WTO) dispute over certain laws, regulations and provisions maintained by the U.S. with respect to antidumping and countervailing duty (CVD) proceedings was launched by Canada December 20, according to a document circulated to other WTO members. The complaint cites nearly 200 instances of alleged wrongdoing by the U.S., in cases that span multiple decades and involving a wide variety of WTO members.

The measures in question relate to U.S. antidumping or CVD investigations, reviews and other related proceedings. Canada alleges the measures run afoul of U.S. obligations under WTO's Anti-Dumping Agreement, the Agreement on Subsidies and Countervailing Measures, the General Agreement on Tariffs and Trade 1994 and the Understanding on Rules and Procedures Governing the Settlement of Disputes.

Democrats Caution on Making Technical Corrections to Tax Package

All 16 Democrats on the House Ways and Means Committee said in a Dear Colleague letter that members should not be in a hurry to roll out bills aimed at adjusting the new tax law, Instead, they advised a more deliberative approach, calling it critical to consider any technical or substantive changes thoughtfully. “It would be a mistake, at this time, to rush to introduce legislation to change HR 1 given all the uncertainty surrounding the law and its implementation,” said the letter from ranking member Richard Neal, D-Mass., and the rest of those on his side of the aisle.

The Ways and Means Democrats pledged to hold off on releasing legislative fixes until the committee holds hearings on possible changes, with Trump administration witnesses, and urged fellow Democrats to hold off themselves until an agreement comes together on each modification. “By acting in a thoughtful and deliberate manner, Democrats will have the ability to fix the flaws created by this rushed process and to improve the law for the hardworking men and women whom we represent,” the letter said.

Washington Insider: Canada Challenges US Tariffs in WTO Case

Amid deep uncertainty in the United States about the nation’s trade policies, Canada has filed a sweeping trade case at the World Trade Organization, the New York Times is reporting this week. It called the case a “diplomatic grenade” aimed at the administration’s “America First” approach” and could threaten the increasingly embattled trade relationship between longstanding North American allies.

The Times says the case could exacerbate tensions between the two nations, which have frayed in recent months as member countries wrestle with trade disputes and attempts to renegotiate NAFTA. The case especially challenges the United States’ use of tariffs to punish “unfair trade practices and protect its markets,” saying those actions violate WTO rules.

The case could expand into a multinational trade dispute, the Times argues, given that Canada, a champion of global agreements, filed it in a way that allows other countries to join. The document lists “numerous problematic trade actions” that it says the United States has taken against China, South Korea, Japan and Germany.

The case was filed on Dec. 20 and centers on the punitive tariffs that the United States imposes when it finds other countries guilty of subsidizing their products or of selling them abroad at unfairly low prices, a practice known as dumping. In addition, the U.S. has lost WTO cases over this system, which differs substantially from that of many countries.

Robert Lighthizer, the United States trade representative, called Canada’s action “a broad and ill-advised attack” on the American trade system.

“U.S. trade remedies ensure that trade is fair by counteracting dumping or subsidies that are injuring U.S. workers, farmers and manufacturers,” the President said Wednesday. “Canada’s claims are unfounded and could only lower U.S. confidence that Canada is committed to mutually beneficial trade.”

Canada has borne the brunt of several United States trade actions, including a decades-long dispute over lumber and recent cases against Bombardier airplanes and Canadian newsprint.

“There are now billions of dollars of Canadian exports to the U.S. that are potentially subject to these restrictions,” said Chad P. Bown, a senior fellow at the Peterson Institute for International Economics in Washington. “That’s what this dispute is all about.”

The case could take years to work its way through the WTO, Mr. Bown said, but could eventually help Canada combat the types of trade actions the United States is increasingly bringing. It could also help Canada protect itself if the United States withdraws from NAFTA or significantly alters key parts of the trade pact that provide an important channel for Canada to appeal trade disputes between the countries.

Canada’s foreign minister, Chrystia Freeland, said the WTO filing was linked to a long-running dispute over Canadian lumber exports.

“This WTO action is part of our broader litigation to defend the hundreds of thousands of good, middle-class forestry jobs across our country,” she said. “We continue to engage our American counterparts to encourage them to come to a durable negotiated agreement on softwood lumber.”

Many of the Trump administration’s trade advisers, including Lighthizer, are staunch defenders of the United States system for combating dumping and foreign subsidies. Lighthizer brought such trade cases against foreign actors for decades as a lawyer for the steel industry and he has criticized the WTO for interfering in what he sees as the United States’ efforts to enforce its own laws.

It is already a fractious time for the three nations. Canada, Mexico and the United States will reconvene in Montreal on Jan. 23 for the next round of NAFTA negotiations. Leaders from all three nations have said they aim to conclude the talks early this year, well before the Mexican presidential election in July, which could lead to a shift in personnel and strategy.

Yet the three countries do not yet appear close to compromise on central provisions of the negotiation, including rules that govern the auto industry and the settling of trade disputes.

Boeing’s recent success in obtaining duties of nearly 300% against a new jetliner made outside Montreal by Bombardier dominated Canadian news reports and parliamentary debate. It also prompted the government of Prime Minister Justin Trudeau to back away from a plan to buy fighter jets from Boeing.

The high profile of the disputes stems from a widespread sense among Canadians that the American system is unfair and could have negative economic consequences. Most of the biggest disputes have involved industries, like forestry, that are the primary — or sole — employer in some regions of the country.

The Canadian case also raises U.S. tensions over whether the U.S. will pull out of NAFTA, as the President threat threatened to do. A main feature of the WTO is the multilateral negotiations of trade rules, including tariffs—a process that the administration claims to want to sideline. So, this case is a big deal, with broad and important implications for many sectors including ag, and which should be watched closely as it proceeds, Washington Insider believes.

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