In Shakespeare’s Julius Caesar, a soothsayer warns the great leader to “beware the Ides of March” – March 15th in the Roman calendar. It was wise counsel that Caesar ignored to his grave detriment, and which Canadians cannot without risking a similar fate. According to media reports, U.S. Commerce Secretary Wilbur Ross told officials that he could submit formal notice confirming his intent to launch NAFTA renegotiations to Congress as early as March 15th. (It is also rumoured to be the date when U.K. Prime Minister May could trigger Brexit by invoking Article 50.)
On NAFTA, Secretary Ross’ notice to Congress will begin a lengthy period of formal consultations and will further detail the Trump Administration’s trade priorities. That said, the events of the past week have already sent unsettling signals about the positions they will likely take. First, President Trump used his joint address to Congress to reaffirm the principles that underpin his outlook on trade. Second, the US Trade Representative (USTR) fulfilled its obligation to Congress by submitting both the President’s 2017 Trade Policy Agenda and its 2016 Annual Report.
Market access
The President’s 2017 Trade Policy Agenda provides an important and insightful overview of the Trump Administration’s plans and priorities on trade. It notes that every action taken on trade will be designed to achieve certain goals, among them being to “promote reciprocity with our trading partners.” This could be interpreted as a ‘reverse’ golden rule: “As others do unto you, you would do unto them.” For his part, Secretary Ross has previously said that he views reciprocity as a fundamental principle of trade – one that is “mostly honoured in the breach” by others.
The Trump Administration has repeatedly criticized various foreign taxes, tariffs, non-tariff barriers and regulations which restrict market access for U.S. exports. The existence of these trade barriers have been used as justification, both formally and informally, for considering the imposition of corresponding retaliatory measures including border adjustment taxes, import tariffs, or the stricter inspection of certain imported goods. Where U.S. officials have identified certain Canadian taxes, tariffs and other non-tariff measures as ‘irritants’ – this is worrisome.
The President’s 2017 Trade Policy Agenda document further builds on this theme by stating it’s “time for a more aggressive approach” and, to that end, the Trump Administration “will use all possible leverage to encourage other countries to give U.S. producers fair, reciprocal access to their markets.” In a subsequent interview with Bloomberg, Secretary Ross said that President Trump had been clear with the Canadian government – which he described in trade terms as an “adverse party” – that it will need to make concessions in the NAFTA renegotiations.
Buy America
In his address to Congress, President Trump indicated that his plans for significant public and private sector investment in infrastructure would be guided by two core principles – “buy American and hire American.” To understand how this might be enforced, one can look to the memorandum President Trump sent to Secretary Ross with respect to new pipeline construction and pipeline repairs. The memo directs the use of “materials and equipment produced in the United States to the maximum extent possible” involving, in the case of steel, fully domestic manufacturing.
During his Senate confirmation hearing, Secretary Ross was asked whether he would commit to eliminating of the procurement provisions in NAFTA which allow Canadian businesses to bid on U.S. taxpayer-funded projects. In his response, Ross testified that all aspects of NAFTA were on the table and that procurement was an issue that would certainly come up. When asked about his views on allowing foreign companies to bid as domestic suppliers, he answered that it is a “highly questionable practice” to be used with extreme care in exceptional circumstances.
Dispute resolution
Among Canadian concerns is that any NAFTA renegotiations will result in changes to its dispute resolution mechanisms. The President’s 2017 Trade Policy Agenda contains language which suggests those fears are not unfounded. A key objective it identifies is “resisting efforts by other countries – or Members of international bodies like the World Trade Organization (WTO) – to advance interpretations that would weaken the rights and benefits of, or increase obligations under, the various trade agreements to which the United States is a party.”
To achieve this objective, Trade Policy Agenda further outlines various ‘major priorities’ including, ominously, the defence of “U.S. national sovereignty over trade policy.” What follows in the document is a provocative discussion about the USTR’s interpretation of American sovereignty as it relates to international trade bodies such as the World Trade Organization – noting “even if a WTO dispute settlement panel – or the WTO Appellate Body – rules against the United States, such a ruling does not automatically lead to a change in U.S. law or practice.”
As H+K Strategies Principal Advisor Gordon Ritchie, a former Ambassador for Trade Negotiations and former Deputy Chief Trade Negotiator for the Canada-US free trade agreement, explains, this is not to be dismissed as some byzantine legal technicality. The dispute resolution provisions in the Canada-US FTA and NAFTA are at the very heart of those agreements. There would not have been, and cannot be, any agreement without dispute resolution provisions which discourage the U.S. from unfairly applying its trade laws unilaterally against partner country imports.
Guiding principles
By way of summary, former President George H. W. Bush once borrowed a memorable rhetorical device from St. Augustine to set out the principles that would guide his Administration: “In crucial things, unity; in important things, diversity; in all things, generosity.” Based on President Donald Trump’s address to Congress and the President’s 2017 Trade Policy Agenda, if a similar structure was used to describe America’s worrying trade policy it might read: In market access, reciprocity; in procurement, nationality; in dispute resolution, sovereignty.