Canada challenges US tariff system

Canada is challenging the Trump administration’s system of levying penalties on imports in a complaint at the World Trade Organization, a move likely to heat up simmering tensions between the two trading partners.

The wide-ranging trade dispute, which was filed with the WTO in December and released publicly on Wednesday, is mostly in response to the steep anti-dumping and countervailing duties that the United States has recently slapped on Canada’s softwood lumber industry.

“This WTO action is part of our broader litigation to defend the hundreds of thousands of good, middle class forestry jobs across our country,” said Chrystia Freeland, Canada’s minister of foreign affairs, in a statement.

{mosads}“We continue to engage our American counterparts to encourage them to come to a durable negotiated agreement on softwood lumber,” Freeland said.

But the complaint, while centered on the forestry and softwood lumber industries, is bigger than that, encompassing the future of North American supply chains and the long-term growth of the integrated economies, a Canadian official said. 

The United States called the complaint, which includes cases that involve a variety of exports as well as other nations such as China and Brazil, an attack on how the nation goes about using its trade enforcement system.

“Canada’s new request for consultations at the WTO is a broad and ill-advised attack on the U.S. trade remedies system,” said U.S. Trade Representative Robert Lighthizer in a statement.

“Canada’s claims are unfounded and could only lower U.S. confidence that Canada is committed to mutually beneficial trade,” Lighthizer said. 

Lighthizer argued that a win for Canada would mainly help other countries like China, which would take any opportunity to dump their low-priced imports into the U.S. market.

“Even if Canada succeeded on these groundless claims, other countries would primarily benefit, not Canada,” he said. “Canada’s complaint is bad for Canada.”

In the 32-page complaint, Canada detailed areas where they argue that the United States’ tariff investigations and reviews have been inconsistent with its obligations under several WTO agreements.

For example, Canada says that the United States not only applied anti-dumping tariffs “in excess of WTO-consistent rates” but also miscalculated subsidies used to determine the level of penalties.

Since President Trump took office nearly a year ago, the United States has levied steep tariffs against Canada in several cases including softwood lumber, paper and passenger jets, creating growing anxiety among Canada’s industries. 

On Wednesday, the Commerce Department announced a preliminary decision to apply new tariffs on imports of certain Canadian paper that it argued received subsidies. 

In 2016, the U.S. imported nearly $1.3 billion worth of the Canadian paper. 

Last month a U.S. trade panel locked in hefty subsidies on softwood lumber. 

Freeland has called the Commerce Department’s duties on softwood producers “unfair and unwarranted.”

“That is why we have already launched legal action through the North American Free Trade Agreement and the World Trade Organization,” Freeland said.

For nearly a year, Canadian officials have made no secret that they would litigate any tariffs by the United States they deemed unfair to protect the critical supply chains and the broader economies of North America. 

The announcement of the case comes ahead of the Jan. 23 start of the next round of trade talks on the North American Free Trade Agreement in Montreal.