Archives
August 2010
July 2010
June 2010
May 2010
April 2010
March 2010
February 2010
January 2010

December 2009
November 2009
October 2009
September 2009
August 2009
July 2009
June 2009
May 2009
April 2009
March 2009
February 2009
January 2009

December 2008
November 2008
October 2008
September 2008
August 2008
July 2008
June 2008
May 2008
April 2008
March 2008
February 2008
January 2008

December 2007
November 2007
October 2007
September 2007
August 2007
July 2007
June 2007
May 2007
April 2007
March 2007
February 2007
January 2007

December 2006
November 2006
October 2006
September 2006
August 2006
July 2006
June 2006
May 2006
April 2006
March 2006
February 2006
January 2006

December 2005
November 2005
October 2005
September 2005
August 2005
July 2005
June 2005
May 2005
April 2005
March 2005
February 2005
January 2005

December 2004
November 2004
October 2004
September 2004
August 2004
July 2004
June 2004
May 2004
April 2004
March 2004
February 2004
January 2004

December 2003
November 2003
October 2003
September 2003
August 2003
July 2003
June 2003
May 2003
April 2003
March 2003
February 2003
January 2003

December 2002
November 2002
October 2002
September 2002
August 2002
July 2002
June 2002
May 2002
April 2002
March 2002
February 2002
January 2002

December 2001
November 2001
October 2001
September 2001
August 2001
July 2001
June 2001
May 2001
April 2001
March 2001
February 2001
January 2001

December 2000
November 2000
October 2000
September 2000
August 2000
July 2000
June 2000
May 2000
April 2000
March 2000
February 2000
January 2000

December 1999
November 1999
October 1999
September 1999
August 1999
June 1999
May 1999
April 1999

April 1998

A Simple Solution To U.S. Bullying

August 23, 2005

Email this page

In the flurry of outrage over the U.S. refusal to comply with the latest NAFTA ruling on lumber, something is missing. Editorials abound, former negotiators and promoters of NAFTA are talking tough, calling the Americans names. Others suggest ill-conceived threats or demand that the Prime Minister "talk" to President George W. Bush.

Nowhere in these responses is there a concrete plan of how Canada should respond.

Lost in the cacophony of bluster is the fact that Canada is already part of a coherent rules-based trade agreement with the United States. It is called the World Trade Organization, formerly the General Agreement on Tariffs and Trade and it has the mechanisms already in place to enable Canada to emerge a clear winner from the current situation.

Founded in the late 1940s, the GATT/WTO was for almost 40 years the primary trade contract between Canada and the U.S.

In all of that time, the United States was never able to levy a countervailing or anti-dumping duty on our exports of lumber. During those four decades, Canada traded profitably, our standard of living rose, Canada won almost all its trade disputes with the U.S. — and Washington abided by the rulings.

By the mid-1980s, 90 per cent of Canadian lumber entered the U.S. tariff free and the duties on the remaining 10 per cent were negligible.

It was only when Canada decided to turn away from the multilateral framework of trade rules with the U.S. and enter into a bilateral one-on-one "free trade" agreement with the U.S. in the mid-1980s, that U.S. industry saw its opportunity and used it. It has been using it ever since.

Under the FTA and NAFTA, it is U.S. law which now applies to all of Canada's exports in countervailing, anti-dumping and related disputes with America. The dispute panels are limited to deciding if the U.S. has applied its own law correctly.

Furthermore, the U.S. can at any time amend its trade law without Canada's agreement and, on lumber alone, it has done so three times to Canada's great disadvantage.

In other words, the FTA and NAFTA, instead of giving us more secure U.S. market access, unleashed the full force of U.S. protectionism to be used against Canada in a way that was not possible under GATT/WTO.

As for the dispute settlement mechanism, touted repeatedly as "the crown jewel" of the FTA, it bears repeating that all agreements end when the negotiated means of resolution are discarded by either player.

The answer is not to shake our fists or shout meaningless threats at America. The answer is to simply return to the safer, more effective, already existing multilateral WTO framework of which Canada and the U.S. are both still members.

Under the WTO, we have all the levers to get back the $5 billion the U.S. has taken in lumber tariffs and to make sure it doesn't happen again.

When Washington not long ago threatened hefty steel duties against Europe, Japan and a number of other steel exporters, Europe triggered the WTO retaliatory process and the Bush administration backed down.

The same defences are available to Canada under the WTO.

Since signing the FTA and NAFTA, the United States has taken 10 trade actions against the Canadian Wheat Board, Canada's largest net earner of foreign currency, and we now have U.S. tariffs against our wheat exports.

In all the years of trading with the U.S. under GATT, the Americans never launched a single formal action against the wheat board, because they knew they could not win.

The essence of the FTA and NAFTA is that they cede vital government powers to the U.S. and the private sector that were used to build an independent Canada.

What the U.S. wants out of the repeated challenges against Canadian lumber exports is to wear Canada down until it agrees to privatize its crown-owned forests, opening them to direct U.S. ownership.

In grain, Washington wants an end to the wheat board. This would see the Canadian grain trade move virtually overnight into U.S. hands.

There is a simple way out, without bluster or insults. Canada does not have to give up ownership of its forests, its industries and its institutions.

With a simple letter to the U.S., under FTA Article 2106, NAFTA Article 2205, Canada can, with six months notice, withdraw from these agreements without penalty and without conditions.

Our trading relations with the U.S. will then automatically revert back to the GATT/WTO framework of international law, which will enable us to both maintain our institutions and trade profitably with the U.S.

All of the intolerable NAFTA rights U.S. companies now have over Canada — to sue the Canadian government, to overturn Canadian laws, to control our exports and energy prices — would disappear. Canada would regain its status as a sovereign nation.

Chasing the dream of a "special relationship" and some kind of shortcut to "secure access" to the U.S. market is a dangerous delusion which has cost Canada dearly.

Superpowers do not have friends or "special relationships," they have interests and they pursue them. Canada must learn to do the same.

-------------------------------------------------------------------

Mel G. Clark is a senior international trade negotiator. He was deputy chief negotiator for Canada at the Tokyo Round of GATT and Canada's chief negotiator for the International Grains Agreement. Retired and living in Ottawa, he is currently writing a book on NAFTA's impact on Canada.

--------------------------------------------------------------------------------

David Orchard is the author of The Fight for Canada — Four Centuries of Resistance to American Expansionism, and ran for the leadership of the federal Progressive Conservative party in 1998 and 2003.

NOTICE: In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving this information for research and educational purposes.