OTTAWA – In Washington last week, there was defiance rather than contrition over a trade disputes panel ruling in favor of Canada on an American challenge of Canadian supply management tariffs.
A U.S. trade consultant and former free trade negotiator predicted the issue will become a factor in the autumn American elections.
“Legally, I don’t think the U.S. has a lot of options,” Bill Merkin said in an interview from Washington, D.C. “But with the election, this is political silly season here. I expect a number of politicians will campaign against this. I expect the White House will put pressure on Canada to negotiate more access.
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“Frankly, given this decision, I can’t imagine why Canada would want to.”
Canadian tariffs challenged
The trade panel, established under the North American Free Trade Agreement, considered a U.S. argument that high tariffs established last year by Canada under the terms of the world trade agreement are illegal under the NAFTA, signed a year earlier.
The U.S., pushed by its dairy and poultry industries, insist the Canadian border should be open to U.S. imports by early next century under the NAFTA.
An American victory would have meant negotiations to reduce tariff levels that protect Canadian dairy, poultry and egg industries from cheaper American imports.
U.S. industry officials were predicting a $1 billion (U.S.) market in Canada for American products if the tariffs could be lowered.
Instead, the trade panel delivered a preliminary ruling last week unanimously supporting Canada’s contention that the rules of the General Agreement on Tariffs and Trade supersede the regional NAFTA.
“The decision is a travesty and makes a mockery of the NAFTA,” said U.S. National Milk Producers’ Federation chief executive officer Jim Barr in a written statement. It makes the trade agreement “a sham.”
E. Linwood Tipton, head of the International Dairy Foods Association, said in a statement the American government should appeal the ruling and continue to fight.
That is the stance Merkin expects the U.S. to take.
Scope of win surprises
He was a U.S. negotiator during the 1987-88 Canada-U.S. free trade negotiations and last week, Merkin said he was caught off guard by the magnitude of the Canadian victory.
“There were arguments on both sides and I’m a little surprised that it appears to be so cut and dry.”
Merkin predicted that some congressmen looking for re-election in dairy states, as well as Republican presidential candidate Robert Dole, will use the ruling to argue that the U.S. is a NAFTA loser.
“It is almost certain to be a political issue here,” he said.
“I suspect the White House will be trying to get Ottawa to at least get involved in negotiations to open the border a little, just to show they care. But given the cleanness of the win and its importance in Canada, I can’t imagine Canada will have any inclination to negotiate.”
