Canada's WTO broadside: What's the strategy ?

By Yves Faguy January 11, 201811 January 2018

Canada's WTO broadside: What's the strategy ?

Anticipating an imminent U.S. retreat from NAFTA, the Canadian government has decided to go on the offensive in managing its trade relations with our Southern neighbor.  By filing a WTO complaint over U.S. use of punitive duties, and charging that the U.S. is in violation of international trade rules, not just in its dealings with us but other countries such as China, “Canada is taking a run against the entire U.S. trade regime,” says John Boscariol, a trade lawyer with McCarthy Tétrault.

“It’s interesting that Canada has chosen to file such a broad complaint,” Boscariol told CBA National. “In the past Canada has filed one-off cases in relation to a specific product or dispute such as softwood lumber. But this is very different in that it is really more of a systemic challenge to [U.S.] measures.”

Why now?

Given recent musings that Ottawa expects the Trump administration is about to pull the plug on NAFTA, there is speculation that Canada is either trying to gain leverage ahead of the next round of negotiations, or signaling that, with no free trade agreement in place, it intends to use the WTO to fight its trade battles.

The reason Canada did this, says Boscariol, is in large part because of the softwood lumber, but by taking on the entire U.S. trade remedies system, Canada is taking the position that the U.S., as our most important customer, must be held to WTO rules when it imposes these anti-dumping and countervailing measures that hamper free trade.

Cyndee Todgham Cherniak writes that the move has been “a long time coming” and strikes at  “’the fundamental way in which the United States Department of Commerce and the International Trade Commission make decisions:”

If Canada is successful at the WTO, the United States may have to change the way it approaches trade remedies cases.  However, before that happens, there needs to be a DSB panel report, an appeal to the Appellate Body and, possibly, an arbitral panel and then – threats of retaliation.  This dispute has a long road ahead of it.  The time to reach the end of the litigation process in this case may take even more time since the United States is not approving new members of the Appellate Body.

Even so, Boscariol calls the timing of Canada’s’ request “mystifying.” “We’re about the start negotiations over NAFTA in Montreal. I’m not quite sure what the strategy is. I’d think you’re giving more ammunition to an administration that has taken the position that the WTO and bi-national panels infringe on the sovereignty of the United States.”

The reaction from the U.S:

Indeed, U.S. trade czar Robert Lighthizer called the move an ''ill-advised attack," adding that "Canada's claims are unfounded and could only lower U.S. confidence that Canada is committed to mutually beneficial trade."

What comes next?

We’ll see if other countries decide to join Canada in stepping forward to complain about U.S. trade practices.  International trade lawyer Bernard Colas is quoted in La Presse as saying the move could have the effect of “uniting the malcontents” against U.S. commercial policy.

Even so, any complaint before the WTO will take years, and the effort is further complicated by the fact that the Trump administration is blocking new appointments to the WTO’s appellate body.

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