OTTAWA – They write in the dry language of lawyers, but the international trade specialists appointed to judge the American attack on Canada’s supply management tariffs could hardly have been more clear in rejecting the U.S. arguments.
In the confidential preliminary report filed July 15 in Washington and Ottawa, a copy of which was obtained last week, the five-person trade disputes panel unanimously dismissed the U.S. challenge under the North American Free Trade Agreement.
“In light of the … analysis and conclusions, the panel determines that the application of customs duties by the government of Canada to the U.S.-origin products … conforms with the provisions of the NAFTA,” the panel of two Americans, two Canadians and a British chair said in the concluding paragraph of its 61-page judgment.
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To arrive at that conclusion, the panel methodically rejected one American argument after another.
In the preliminary report, which is being challenged by the Americans in hopes of winning a more favorable final report on Sept. 15, the U.S. was told:
- Its interpretation of the free trade agreement and its intent would be a setback to trade liberalization.
- Its challenge of Canada’s tariffs contradicts American arguments and positions during the free trade negotiations.
- By signing the 1994 world trade agreement under the General Agreement on Tariffs and Trade, which included Canada’s tariff proposals for dairy, poultry and egg sectors, the U.S. effectively agreed to Canadian tariffs before they were implemented.
- By challenging the Canadian tariffs, the Americans were contradicting their own decision to impose tariffs to protect some of their own sensitive agriculture industries from imports.
The dispute started after Canada last year converted import quantity restrictions to tariffs under the requirements of the GATT.
The Americans immediately challenged the tariffs, arguing that the 1994 NAFTA does not allow new tariff barriers.
A successful challenge would have opened Canada’s $6 billion supply managed industries to American imports, undermining and perhaps destroying the Canadian system of controlled supplies and prices.
Canada argued the GATT takes precedent over the NAFTA and the issue of supply management tariffs had been deliberately set aside in North American free trade talks to be settled in the world trade negotiations.
Inconsistency unresolved
The panel concluded that to accept the American argument would be to support a return by Canada to import quotas, in contravention of the GATT. This was an “unresolved inconsistency” in the U.S. approach.
The U.S. argued Canada had “gambled” it could keep its import quotas in GATT talks. The panel disagreed.
It noted the U.S. had been one of the leaders during GATT talks in pushing for conversion of import quotas to tariffs.
It noted the U.S. did exactly the same thing with sugar and other commodities that it was challenging in Canada.
“To adopt the approach of the United States would be to endorse an interpretation (of the free trade agreement) that does not further the NAFTA objective of trade liberalization,” the panel said.
It left little ambiguity for the American lawyers to challenge before the final report is written.
