The US Definition of Free Trade Leaves Something to be Desired

The softwood lumber dispute is at the top of Canada’s trade agenda. Here the United States may even have a point, though that’s highly debatable. The United States complains that Canadian governments undercharge – and thus subsidize – forest companies that harvest lumber on Crown land.

But, like most trade disputes, the quarrel has produced innocent victims. Most forest land in Atlantic Canada is privately owned, so the US complaint simply doesn’t apply. Yet the US Commerce Department plans to impose a 9.67 per cent “anti-dumping” duty on Atlantic lumber. At least that’s better than the 29 per cent duty the US plans to impose on lumber from elsewhere in Canada.

However, it’s U.S. trade war on imported steel that presents the greatest danger to the world trading system. The U.S. has imposed duties of up to 30 per cent on steel, and now the European Union appears ready to strike back.

These days precision-guided missiles are as available for trade wars as for war wars. The European Union, with what it hopes will be deadly accuracy, has aimed its trade ordnance right at President George Bush’s political vulnerabilities.

The targets are likely Florida, Pennsylvania, West Virginia and Wisconsin. These are states President Bush narrowly won in the 2000 election. So the Europeans appear ready to unveil duties of 10 to 30 per cent on motorcycles (Harley Davidson Inc. is headquartered in Wisconsin); on citrus fruit, targeting Florida; and on steel, targeting Pennsylvania and West Virginia.

The United States has played at this game, too, aiming tariffs at French cheese and wine, because France is often the ringleader behind European protectionist moves.

Canada and Mexico are exempt from US steel tariffs, but Canada looks ready to join the fracas anyway. Late last week, Ottawa launched an investigation of steel imports that could lead to the imposition of heavy tariffs on steel imported into this nation from outside North America. This would damage Canadian manufacturers, but common sense is the first casualty of trade disputes.

Even within Canada, trade wars rage. Unilever Canada is now before the Quebec Court of Appeal arguing that Quebec’s rule against butter-coloured margarine violates Canada’s Agreement on Internal Trade, plus the North American Free Trade Agreement and World Trade Organization (WTO) rules. Unilever won its case in a lower court, but Quebec, unimpressed, refused to budge.

Meanwhile, Quebec and Ontario continue to bar each other’s construction workers, no matter what the internal agreement on trade says. Its dispute settlement mechanism is toothless.

Almost as weak is the WTO’s dispute settlement mechanism. Both the European Union on steel and Canada on softwood lumber plan to appeal US trade barriers to the WTO, but it’s a long costly process. Somewhat bizarrely, the only stick the WTO possess is allowing the aggrieved nation to launch its own tariffs, potentially leading to further escalation of trade disputes.

These disputes cause real harm to real people, often innocent bystanders. Canada, internally, and the world in general need effective and timely dispute settlement mechanisms.

Unfortunately, Canadian groups, like the Council for Canadians, have been world leaders in fighting against such mechanisms, labeled by the Council a “bill of rights” for corporations that will undermine national “sovereignty.”

Radical groups like the council fail to realize that the 15,000 British Colombians, and perhaps hundreds of Maritimers, who could lose their jobs because of softwood lumber dispute, and the hundreds of thousands of Canadians who are vulnerable to other disputes, really are people who matter.

Of course, radicalism feeds on hard times, so perhaps it’s no surprise that ideological anti-globalists will fight tooth and nail against anything that could make the world a safer place for trade and for the workers who depend on trade.

But, the rest of us should ignore the anti-trade slogans and demand that our leaders negotiate solid dispute settlement mechanisms.