THE repeated disregard in the United States for the rulings of international trade panels is raising the ire of Canadians, causing many to question the value of trade deals.
Canadian jaws dropped in incredulity this month when the United States refused to comply with a North American Free Trade Agreement ruling on softwood lumber after losing a last chance appeal of a string of previous rulings that found in favour of Canada’s position.
The path was already worn. The U.S. has repeatedly lost international trade rulings on its challenges of the Canadian Wheat Board and yet does nothing to stop the harassment.
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America’s cavalier disregard of these treaty commitments it solemnly signed amounts to a slap in the face to its most valuable trading partner.
This does not mean trade agreements are worthless. The overwhelming volume of Canada-U.S. trade is conducted smoothly. Since 1989, trade between Canada and the U.S. has tripled. Without trade agreements Canada, with limited diplomatic weight, has little hope of rectifying trade irritants. For example, Canadian canola oil sales in China, India and elsewhere suffer because it faces higher tariff walls than American soybean oil, but without trade pacts, trying to get China or India’s attention to right this inequity is almost impossible.
The real problem with NAFTA is the lack of enforcement power. For example, currently the only stick available in the softwood lumber impasse is Canada’s application to the World Trade Organization to impose retaliatory duties on billions of dollars worth of U.S. goods. But such retaliation usually raises the cost of imported products for Canadians.
Canada should take a two-prong approach to getting American compliance. Frank McKenna, Canada’s ambassador to the U.S., should immediately begin a full court press to explain to U.S. politicians and particularly the public the danger and cost of ignoring international obligations. Getting the public’s interest should not be difficult, given that they are being fleeced over the cost of building new homes while a few lumber companies are raking in billions.
Longer term, Canada must try to get NAFTA amended to improve enforcement of its dispute panel rulings.
Reopening the deal has risks. The U.S. will want something in return, exposing Canadian icons like health care and cultural institutions to some danger.
But with the right strategy, Canada should be able to get what it wants by offering to do only what it should do.
The U.S. key interests now are security, international co-operation and energy. Most Canadians realize this country needs to improve its security and rebuild its diplomatic and military muscle. So on that there is room to negotiate.
Canada also has huge oil reserves. Surely measured access to that carrot can also generate diplomatic currency with which to barter.
