Letter From Canada

Eribert Loehner

Eribert Loehner reports ‘America First’ actually leaves Americans last.  Much has changed over the last year in Canada/US relations and not for the better.

Canada has always had great relations with the US.

One would be hard pressed to tell the average Canadian and American apart. Canadians have always viewed Americans as our closest friends and allies.

Our soldiers have fought side by side in WWI, WW2, Korea, Iraq and Afghanistan. We protect each other’s borders through NATO and NORAD, and the 5000-mile border between our two countries is undefended.

Integrated economies

The two countries have had a totally integrated economy to the benefit of both countries for decades. The US is Canada’s largest trading partner and Canada is America’s second largest after China.

This economic relationship was reaffirmed by the North American Free Trade Agreement (NAFTA) in 1994 and its predecessor the Canada-US Free Trade Agreement since 1988.

These agreements eliminated duties on most goods and services between the two countries. About one billion dollars’ worth of trade from each country crosses the Canada/US border every day.

The exact amount of the Canada/US trade balance is not clear. Canada and the US calculate their statistics differently.

Statistics figures don’t cross the border!

Statistics Canada says the US has a trade deficit with Canada of about $14 billion annually, but ironically in the US the Office of the US Trade Representative says the US has a $12 billion surplus!

Either way, considering the volume of trade, this does not even come close to the $55 billion deficit the US has with the other NAFTA partner, Mexico, the $92 billion deficit the US has with countries of the European Union, and the whopping $385 billion annual deficit it has with China.

Who is the villain?

Canada’s PM Justin Trudeau with President Trump recently — but just who is the villian?

Yet President Trump has zeroed-in on Canada as one of America’s greatest trade villains. Perhaps he felt Canada would be an easy touch; it was a grave miscalculation.

During the presidential campaign, Donald Trump often claimed that NAFTA was the worst trade deal in US history.

After he became president, Canada’s Prime Minister, Justin Trudeau, visited Donald Trump several times to establish a positive relationship and convince the new president of the mutual benefits of NAFTA.

Both agreed that NAFTA should be up-dated in light of today’s technology that allows billions of dollars to move between countries with click of computer mouse.

However, it can now be said that Trudeau’s charm offensive has failed. President Trump’s ‘America First’ policy has emboldened American businesses to circumvent NAFTA by apply for duties on imported Canadian goods domestically through the US Department of Commerce.  

First volley from US woodlot owners

The first volley came from American private woodlot owners who had a duty on Canadian softwood lumber imports re-applied. This duty allows woodlot owners to charge more for wood harvested from their lots.

The US cannot produce enough lumber to satisfy its domestic housing market and relies heavily on Canadian lumber.

The US Homebuilders Association has stated that the duty has increased the average price of a new house in the US by $9,000 and for every $1,000 price increase 150,000 new home buyers are eliminated from the housing market.

This is hardly ‘America First’; it could be best described as American woodlot owners first. Canada has successfully defended against this duty many times in the past and has already filed a complaint with the World Trade Organization.

Bombardier targeted

The second shot was more blatant. After Bombardier of Canada landed a $2 billion deal to sell 75 small regional jetliners to Delta Airlines with an option to sell 50 more; Boeing, with the expressed support of the Trump administration, filed a claim that this sale caused it financial harm.

The US Commerce Department immediately imposed a 300% duty on the Bombardier aircraft.

However, after Canada asked for a review by the US International Trade Department, it was revealed that Boeing did not even bid on the Delta order; Boeing does not make this type of aircraft.

Boeing claimed harm to production it did not have. Despite the Trump administration’s best efforts, the duty was rescinded.

After these two attempts to impose duties on Canadian goods, the White House became aware that Canada was adept and defending itself against arbitrary US tariffs.

Steel and aluminium duties

To ensure the next attempt would not fail, Donald Trump imposed a 25% duty on steel and a 10% duty on aluminum imports through a presidential executive order.

To prevent his order from being scrutinized by Congress, President Trump issued it under Section 232 of the Trade Expansion Act.

This allows the president to restrict the importation of goods through tariffs if he deems the importation is a threat to national security.

Canada, a national security threat to the United States? This is an insult to generations of soldiers, both American and Canadian.

In response, Canada has imposed duties of equivalent value on goods imported from the United States. The goods targeted are from those states where governors are from Trump’s Republican Party.

Until now, most of these states have had trade surpluses with Canada. Opposition to Trump’s actions are now coming from within his own political party. Prime Minister Trudeau has made it clear that ‘Canada will not be pushed around’.

Trudeau’s actions have infuriated President Trump who responded that Trudeau should not have done this. It will cost him a lot of money. Clearly the president does not grasp how international diplomacy works.

The Prime Minister of Canada answers to the people of Canada, not the President of the United States. If President Trump thinks his bluster has Canadians cowering in the corners, he should take note that all the political parties in our usually fractious parliament have stood in support of the Prime Minister’s dealings with him.

In the meantime the insults against Canada from the White House continue. The president is now threatening to impose a duty on Canadian-made automobiles, most of which are made by American manufacturers.

American automobile manufacturers have already warned that this duty will increase the price of an American made automobile by around $8,000.

One can only wonder how much damage President Trump can do to the US economy and America’s reputation with its closest friends and allies by putting ‘America First.’

Ford and General Motors have both criticised the Trump administration’s proposed tariffs on imported steel, saying that 80% of jobs involving steel are in using it, not manufacturing it. It’s the old free trade versus protection argument, and traditionally the Republicans have been pro- free trade.

Always great to get your Canadian updates Eribert. As you point out, so many of Trump’s policies aimed at promoting the US economy actually damage it.

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