Weekly trade report for Jan. 8-14, 2018
Canada has filed a new World Trade Organization (WTO) complaint against the US that is stunning in its scope. It targets in detail the way the US implements its unfair-trade laws, enumerating many practices that are at the core of US trade-remedy measures but that allegedly breach WTO rules.
Not complaining about a specific antidumping or countervailing duty case but referencing one hundred twenty-two US antidumping (AD)/countervailing duties (CVD) imposed on countries from across the globe, it appears, as one analyst put fit, “almost like Canada is fighting this on behalf of the international community.” A US Council on Foreign Relations analyst warned, “Canada has just detonated a bomb” under NAFTA and the global trading system.
Curiously, Canadian officials said that the complaint has a more specific target – aimed at the US AD/CVD duties on softwood lumber, against which Ottawa has separately filed WTO and North American Free Trade Association (NAFTA) complaints. It will be interesting to see how many, and which, other WTO members request third-party rights to participate in the case.
US methodology in unfair trade cases has long been the target of WTO complaints – cases largely though not always lost by the US. But these were brought by trading partners regarding specific cases in which the US imposed duties, and usually targeted somewhat narrow practices such as zeroing, on which the US loses at the WTO.
The new Canadian complaint is so far-reaching, covering so many practices, that it is likely it would result in a mixed ruling, if it is taken all the way through dispute settlement. In that case, both countries may well appeal. Because of the complexity, this will take a long time to resolve.
Rather than aiming to take the case all the way, however, Foreign Minister Chrystia Freeland told reporters that the complaint was a response to the “unfair and unwarranted” US duties on softwood lumber. She added that it is part of “broader litigation” to defend jobs in the forestry sector. Canada already has filed a specific WTO case as well as a NAFTA case against the lumber duties.
In the meantime, the complaint will provoke anger in the US. There is bipartisan support for defending tough US trade-remedy laws, and there is strong support among domestic industries that regularly use these laws, led by steel, aluminum, and chemicals, but involving many others including agriculture.
So one might ask why Ottawa chose to undertake such a provocative action now, just at the edge of what is seen as a make-or-break NAFTA renegotiation round and when the US attitude toward the WTO is already negative? Presumably Ottawa believes it has a winning case and wants to rein in Washington’s use of trade remedies that have been pounding Canada beyond just lumber – on aircraft and, just this week, paper. All these have angered Canadians. While the lumber duties may be the direct provocation, this is a blanket approach which Ottawa didn’t try in the past, when it successfully complained to both the WTO and NAFTA about previous lumber duties.
Canada has long tussled with the US over its AD/CVD