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The looming threat of tariffs
As the political landscape shifts, the possibility of U.S. President Donald Trump imposing tariffs on Canadian goods has become a hot topic. Experts suggest that if these tariffs materialize, Canada has a robust case to challenge them under the Canada-U.S.-Mexico Agreement (CUSMA).
However, the real question lies in the speed of the decision-making process and whether the U.S. would adhere to any rulings made. Wendy Wagner, a partner at Gowling WLG, emphasizes that a rules-based system is only effective if the governing bodies respect it.
This raises concerns about the U.S.’s historical compliance with trade decisions.
Historical context and compliance issues
The U.S. has a mixed track record when it comes to adhering to international trade rulings. For instance, when the World Trade Organization ruled against the U.S.
in 2018 regarding metal tariffs, the U.S. chose to disregard the decision. This history of non-compliance raises significant questions about the effectiveness of CUSMA in resolving disputes. If Trump were to impose blanket tariffs, it would be a blatant violation of free trade principles, as noted by Wagner.
The stark nature of such tariffs leaves little room for negotiation, making it a critical issue for Canada.
Canada’s potential responses
Should the U.S. impose tariffs, Canada has several avenues for response. The first step would be to challenge the tariffs through CUSMA, which would initiate mandatory consultations within 30 days.
If these consultations fail to yield a resolution, a dispute settlement panel would be established to evaluate the situation. This process can take up to a year and a half, during which Canada could impose countermeasures if the U.S.
does not comply with the panel’s findings. Prime Minister Justin Trudeau has already indicated that Canada would retaliate if tariffs are imposed, although this could put Canada in violation of the treaty if done prematurely.
The importance of following legal processes
Despite the urgency of the situation, experts like Clifford Sosnow stress the importance of adhering to the legal processes outlined in CUSMA. Following these procedures not only affirms the significance of the agreement but also compels the U.S. to engage in the process. This engagement is crucial, as it prevents the U.S. from completely abandoning the treaty. A refusal to participate would signify a dramatic shift in U.S.-Canada relations, potentially leading to a broader repudiation of the agreement itself.
Strategic and symbolic implications
For Canada, pursuing the legal route offers both strategic and symbolic value. It reinforces the notion of a rules-based system over a power-based one, highlighting the importance of legal frameworks in international trade. If the U.S. were to reject the process, it would not only undermine the treaty but also reflect poorly on its commitment to international agreements. This situation underscores the delicate balance of power in trade relations and the need for both countries to navigate these challenges carefully.
