OTTAWA – Canada and the United States have exchanged their final insults in the legal battle over whether tariffs protecting Canadian dairy and poultry industries are legal.
It led to worries in the House of Commons recently that Canada could lose the case, which would leave supply-managed sectors like dairy and poultry vulnerable to cheaper American imports.
Dairy farmer and Liberal MP Wayne Easter worried that Canada undermined its position by failing to make more clear during negotiations that supply management protective tariffs are covered under world trade rules rather than through the North American Free Trade Agreement. The U.S. is using NAFTA in its challenge.
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Agriculture minister Ralph Goodale maintained the government view that it will win the NAFTA challenge.
“The United States, in our view, is entirely misconstruing the negotiating history of the NAFTA and the World Trade Organization,” said Goodale May 3.
“They are now trying to obtain by the dispute settlement mechanism what they in fact could not obtain at the bargaining table, and Canada will stand up for itself.”
The U.S. has challenged protective tariffs under the terms of NAFTA, arguing Canada’s decision to impose the charges under world trade rules is illegal.
A decision, with the future of this multi-billion dollar farm sector hanging in the balance, is expected in July or August.
In final written arguments presented to the NAFTA dispute panel last month, the U.S. argued Canada played a “high risk gamble” and lost.
It signed a North American deal outlawing new tariffs and then signed a world agreement that allowed new tariffs in place of quantity-based import controls, expecting the world agreement to take precedence.
But it did not win approval for that contention in a NAFTA side agreement.
The U.S. said Canada signed the 1989 free trade agreement and then the NAFTA, assuming either the world agreement or a separate agreement with the Americans would allow those protections to continue.
The brief claimed the Americans had been informing Canada that it would challenge Canada’s tariffs for years.
Canada, in response, said the U.S. did not raise this objection until December 1994.
It accused the Americans of trying to win the case merely by saying Canada is wrong, without feeling the need to prove the point. “Canada maintains that the lack of substantiation for the U.S. position renders it highly suspect.”
The U.S. also is being hypocritical because it has used world trade rules to convert some of its own import restrictions into tariffs, said the Canadian brief.
The U.S. has imposed new tariffs, replacing import quotas, on peanut butter and crystal drink mixes which it receives from Canada.
