Canada-US Trade – Senate support in question(s)

President Trump’s nominee for U.S. Trade Representative, Robert Lighthizer, recently attended his confirmation hearing before the U.S. Senate Finance Committee – the influential committee with broad jurisdiction over matters related to trade agreements, taxes, tariffs and import quotas, transportation of dutiable goods, as well as ports of entry and delivery. Given the importance of the committee’s role in developing U.S. trade policy, the questions about Canada posed by the senators were arguably as significant as any of the answers provided by the witness.

During his appearance, USTR-designate Lighthizer repeatedly testified that he had heard about a “variety of issues with respect to Canada” from senators throughout the confirmation process. While he noted that softwood lumber was “certainly at the top of the list” – a dispute which he described as being a “very serious kind of intractable sort of problem that has enormous political consequences on both sides of the border” – Lighthizer then reiterated, somewhat ominously, that there were “a number of issues that we have to address with respect to Canada.”

The fact that multiple senators have raised multiple concerns about Canada with the USTR, both publicly and privately, should be of grave concern to Canadian stakeholders. It casts doubt on the comforting belief that Congress will act as a counterbalance to the Trump Administration’s aggressive posture on trade irritants, and that Canada is less of a target for U.S. trade hawks than other countries such as China and Mexico. More importantly, it calls into question the efficacy of advocacy campaigns directed primarily, if not exclusively, at the U.S. Senate.

All (state) politics is local

Prime Minister Trudeau and his government have often, and correctly, noted that Canada is the primary export market for businesses in 35 of the 50 U.S. States. Unfortunately, neither the Chairman of the Finance Committee, Senator Orrin Hatch (R-UT), nor the Ranking Member, Senator Ron Wyden (D-OR), are from those States. Consequently, any leverage that Canadians may hope to use in engaging the Finance Committee would be blunted. It may also explain why both senators put Canada squarely in their sights when questioning Lighthizer.

For his part, Senate Finance Committee Chairman Hatch began his questions by asserting that it was “well documented that Canada refuses to enforce intellectual property rights for the in-transit cargo destined for the United States.” Senator Hatch then asked Lighthizer to commit to addressing the matter with Canada as well as ensuring that other U.S. government departments and federal agencies were “made aware of the importance of this issue in their engagements with Canada” including in relation to bilateral discussions regarding cargo pre-clearance.

Ranking Member Wyden, in turn, used his opening statement to criticize President Trump for campaigning on the view that NAFTA was the “worst trade deal ever” but, then, once in office, suggesting that the U.S. trade relationships with Canada only needed “tweaking” – adding “our trade policy needs to deliver results, not just talk.” Senator Wyden then focused his questions on the subject of softwood lumber, a dispute he characterized as “the longest running battle since the Trojan War,” asking how Lighthizer was going to “get tough with Canada.”

Senator Tom Carper (D-DE) later raised import tariffs that Canada places on poultry under supply management, and asked Lighthizer how renegotiating NAFTA could help in “fixing that kind of imbalance.” (It is perhaps worth noting that the value of Delaware’s exports to Canada are less than its exports to Belgium.) By way of response, Lighthizer testified “I think it’s something that, when we sit down with Canada, we should raise – that and a variety of other subjects which have been raised by various members of the committee during the course of this process.”

Perhaps more troubling, these types of comments have come from Senators who represent states for whom Canada is their biggest export market. Senator Pat Toomey (R-PA), asked Lighthizer to add to his list of “Canadian priorities” Canada’s resistance to allowing U.S. dairy exports into the country. Senator Toomey noted that Pennsylvania is a dairy producing state that could “do quite well” selling dairy products into Canada. This suggests that even significant exporters to Canada view the NAFTA renegotiations as a means of further increasing exports.

Senator Toomey is not the only, or first, representative from one of the 35 exporter-to-Canada States to use a confirmation hearing to raise irritants with Canada. Senator Tammy Baldwin (D-WI), a member of the Senate Commerce Committee, took the opportunity offered by Commerce Secretary Wilbur Ross’ confirmation hearings to urge the Trump Administration to eliminate the procurement provisions in NAFTA which allow Canadian businesses to bid on U.S. taxpayer-funded government contracts – prompting a letter from Canada’s Ambassador.

Senator Baldwin’s stance on ‘Buy America’ provisions is well-established, and her past efforts to include ‘Buy America’ restrictions for various types of large infrastructure projects have been supported by a number of her Democrat colleagues including Senator Bob Menendez (D-NJ), Senator Debbie Stabenow (D-MI), Senator Bob Casey (D-PA), and Senator Claire McCaskill (D-MO). This partial list is significant as all of those senators are members of the Finance Committee and each represents a state for whom Canada is their primary export market.

Confirmation hearings are cautionary tale

The Lighthizer confirmation hearings offer a cautionary tale to all those who believed the Trump Administration is politically isolated on the issue of NAFTA renegotiations. If influential senators from key U.S. States on the Finance and Commerce Committees are seeking commitments from the USTR and Commerce Secretary to ‘get tough’ with Canada on such varied issues as ‘Buy America’, enforcement of intellectual property laws, softwood lumber, and supply management, Canadian stakeholders need to find stronger allies in Washington – and fast.

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Jack Hughes, Vice-President
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