Formal talks on the United States-Mexico-Canada Agreement (USMCA) begin in July, but we’re coming off a week of rising trade tensions between Canada and the U.S. While testifying on international trade and economic growth, U.S. Commerce Secretary Howard Lutnick slammed Canada’s trade policies.
There was also criticism from U.S. trade point man Jamieson Greer over what he called trade irritants by Canada.
Canadian Prime Minister Mark Carney has created a new advisory team on Canada-U.S. trade relations, and that team holds its first meeting Monday in Ottawa.
The new advisory committee is made up of representatives from business, trade and labor. It also includes current and former high-profile lawmakers from opposition parties. Carney’s panel has a tough job ahead, especially with the rhetoric coming out of the U.S. two months ahead of the review on the current free trade agreement. Canada has endured a year of punishing tariffs on key sectors of its economy. Provincial governments have fought back by banning American liquor on store shelves, and it’s having some effect. Here’s US trade representative Jamieson Greer, describing it as a trade irritant.
"Think about this way: There are two countries that have retaliated economically against the United States in the past year — the People’s Republic of China and Canada," said Greer, a U.S. Trade Representative. "So my sense is there may have to be an enforcement action to deal with this issue on wine and spirits."
Carney said the banning of American alcohol is a provincial matter. Even so, he said, he has several U.S. irritants of his own.
"Fifty percent tariff on steel. Fifty percent tariff on aluminum. Twenty-five percent tariff on automobiles. All the tariffs on forest products," Carney said. "Those are more than irritants. Those are violations of our trade deal."
Average Canadians have also fought back by not buying American products, when they can, and by avoiding holiday travel to the U.S — much of it over comments about Canada becoming the 51st state. Lutnick was recently grilled about that by U.S. Senator Jeanne Shaheen (D-NH).
Shaheen: "Secretary Lutnick, how does insulting our closest ally and neighbor help the businesses in my state of New Hampshire, and states all across this country, who are hurting because of the loss of Canadian business and tourism?"
Lutnick: "Canada’s economy leans on the incredible $30 trillion economy of America."
Shaheen: "There’s no doubt about that, Mr. Secretary. But insulting our closest ally and neighbor, who provides a lot of business. We have a lot of businesses in New Hampshire, small businesses, who work on both sides of the border. We have all those Canadian visitors who are not coming because of your comments and comments by the administration. How does that help our economy?"
Carney’s government has made gains over the past several months in diversifying its trade with other countries to become less dependent on the U.S. The American administration has decided to hold review talks first with Mexico — possibly a way of isolating Ottawa.
Several sources in Ottawa have also indicated Washington, D.C. is demanding a so-called entry fee to resume the talks on the USMCA; in effect demanding more concessions from Canada just to get back to the table.
Ralph Goodale is Canada’s former high commissioner to Britain and a former Liberal cabinet minister. He’s one of the new members of Carney’s advisory panel on U.S.-Canada trade relations.
"Part of their strategy is to create chaos," Goodale said. "Create all sorts of distractions and diversions and get people running after bright shiny objects down rabbit holes. And I think we have to resist that temptation in this process. It’s a very complicated negotiation. There are lots of issues to discuss. We need to be sure we don’t get distracted, we don’t lose our nerve, we’ve got to have a backbone of steel and be patient."
One of those distractions could be the latest talk coming out of the White House. President Donald Trump has offered immediate tariff relief to Canadian aluminum and steel companies that commit to expanding their manufacturing into the U.S. — just as he has been pressuring auto makers to move production. But some in Canada’s aluminum and steel sectors said Trump’s offer doesn’t make economic sense. With billions already invested you can’t just close an existing plant and walk away.
As far as the negotiations, Carney said the U.S. will not dictate the terms of the talks. There is a negotiation, he said, and the two sides can come to a mutually successful outcome, but it will take some time.
"Our destiny is first and foremost determined by what we do [in Canada], how we build here," Carney said. "Canadians get that. I’m not sure everyone south of the border understands that to the extent it is true."
