IssuesU.S. Relations

U.S. Relations

First Published: Oct 04, 2019
Last Updated: Oct 04, 2019
Monitored by: Roberto Chavez

Background

Flashback to March 2016, with President Obama in Office, and the Democrats fairing as favorites to win the 2016 election, the Canada-United States relationship looked to be a political and ideological alliance, and a key propeller of Mr. Trudeau’s foreign policy for years to come. President Obama and Mr. Trudeau aligned ideologically on almost every issue, from climate change, to the importance of multilateralism, and from a progressive trade agenda to security and arctic affairs.

In the short stint that Mr. Obama and Mr. Trudeau coincided in power, there was a number of diplomatic encounters, that emphasized ideological alignment and desire to work together. These included the first state dinner featuring a Canadian Prime Minister and U.S. President in nearly twenty years. Additionally, months later, Mr. Obama was invited to speak in the Canadian Parliament. At the time, it seemed that in a Democratic Administration, Mr. Trudeau had the perfect international ally to carry out much-desired mandates on foreign affairs and international trade.

Fast forward to November 9th, 2016 the day after the US election, which resulted in Mr. Trump’s upset victory, and marked a turning point in the diplomatic and political relationship between Canada and the U.S. administration, to Mr. Trudeau’s detriment.

With President Obama in office, the largest issue at hand was the re-negotiation of the softwood lumber agreement which expired on October 12, 2015.  An issue of vital importance to Canada’s natural resource sector, however by no means an issue requiring whole of government focus. On the other hand, since his election, President Trump’s policies have one-by-one become among the most trying issues for the Trudeau Government. While softwood lumber remains a contentious item on the agenda, under Mr. Trump the US trade and policy files grew to be the largest and most defining. Key items included the NAFTA re-negotiation, the US decision to pull out of the Paris Agreement on climate change, and the implementation of steel and aluminum tariffs on Canadian industry in the name of protecting domestic security.

Current Status

After thirteen months of negotiation with the Trump administration, the Trudeau Government announced the completion of negotiations over a new multilateral trade agreement for North America. The new agreement includes several “wins” for Canada, including the preservation of Chapter 19 on dispute resolution from NAFTA, as well as no new tariffs on steel shipments to the United States, furthermore, cars sold under North America’s free trade system must now be more North American, with regional content minimum rising to 75%, from 62.5%. Amongst losses to Canada, the new deal gives American Farmers’ tariff-free access to 3.6% of Canada’s dairy market, as well as the removal of the entire class seven category. Further, copyright on intellectual property such as books, music, artworks and the like is being expanded to seventy years from fifty years, and biological class drugs will be protected from generic competitors for ten years, from the previously agreed eight years.

While polling on Canadians’ impressions on NAFTA indicates that Canadians have a positive view of the work done by the Trudeau Liberals, the deal is currently at gridlock in the US Congress, which may impede the ratification of the document before the October 21st election. This would impact the election narrative, with Conservatives expected to go on the offensive, pointing at the Liberal’s failure to get the agreement done.
Further, it is worth noting that the Trudeau Liberals eventually managed to reach a deal with the Trump administration to drop steel and aluminum tariffs to Canada. The Liberals are expected to campaign on this achievement.

No progress has been made on the issue of softwood lumber.

Liberal

No specific proposals yet.

During the last election, the Liberals campaigned on working in partnership with the United States and Mexico to develop a North American clean energy and environmental agreement. The Liberals also campaigned on expanding trade relations with the United States back in 2015.

Conservatives

No specific proposals yet.

In his Vision for Canada speech series, Mr. Scheer mentioned a number of aspirational items regarding the United States, during his speech on foreign policy. It is worth mentioning these speeches were meant to outline Mr. Scheer’s vision, and not concrete policy points.

  • Renew and strengthen the Canada-United States relationship
  • Work with allies, such as the United States to work together on global commitments on military and security matters

NDP

  • Suspend the Safe Third Country agreement with the United States, allowing people to make asylum claims at official border crossings.
  • Adopt measures to stabilize the Canadian steel market, and protect the sector from predatory practices of foreign producers who are shut out of other markets.
  • Require the use of Canadian-made steel and aluminum for infrastructure projects across the country.
  • Introduce a payment protection program for produce growers and take immediate steps to restore protection for growers selling to the U.S. under the Perishable Agricultural Commodities Act.

Green Party

People's Party

Bloc Quebecois

September 5, 2019
Roberto Chavez

NAFTA panel says U.S. can’t show harm from Canadian softwood industry.  A joint NAFTA panel has given the United States three months to rethink its tariffs on imports of Canadian softwood lumber.

The five-member panel of Canadian and American representatives says there is no evidence that Canada's softwood industry has harmed United States softwood producers.

The most recent softwood agreement between the two countries expired in the middle of the last federal election.

Eighteen months later the U.S. imposed a new round of import duties, arguing Canada unfairly subsidizes its softwood producers by underpricing lumber cut on government-owned land.

Canada has filed complaints under both NAFTA and World Trade Organization rules.

The Canadian industry is struggling with numerous mill closures and layoffs amid the tariffs, depressed prices from lower international demand and supply issues in Canada related to forest fires and pest infestations.

September 5, 2019
Roberto Chavez

Bank of Canada holds rates steady but flags global trade concerns.  The Bank of Canada kept its key interest rate unchanged at 1.75 per cent Wednesday, while warning that the U.S.-China trade conflict is having a more damaging impact on global growth than previously thought.

“As the US-China conflict has escalated, world trade has contracted and business investment has weakened,” the bank stated Wednesday in a news release. “This is weighing more heavily on global economic momentum than the bank had projected in [July].”

Domestically, the bank noted that Canada’s second-quarter growth was strong and exceeded the bank’s most recent forecast. Wednesday’s release pointed to stronger energy production and housing activity as contributing factors.

September 5, 2019
Roberto Chavez

A day after the U.S. imposed new tariffs on goods from China, the Chinese Commerce Ministry said it lodged a complaint against the country at the World Trade Organization.

The latest tariffs actioned by the U.S., escalated the trade war with China by imposing 15 per cent tariffs on what China says will affect $300 billion of Chinese goods, violate the consensus reached by the countries’ leaders at a meeting in Osaka, the Commerce Ministry said. As Reuters reports, the lawsuit represents the third that Beijing has brought to the WTO to challenge U.S. President Donald Trump’s China-targeting tariffs.

Trump warned China last week that he would be “tougher” on China if trade talks dragged on into a second term. Negotiators from the two countries are supposed to meet in Washington to attempt to defuse the trade war, but as Reuters points out as well, no precise dates have been set yet.

August 28, 2019
Roberto Chavez

Previous Interim CPC leader Rona Ambrose disagrees with CPC Leader Andrew Scheer’s assertion that Trudeau caved to Trump on NAFTA.Ms. Ambrose, who was interim Conservative leader after the party's 2015 election defeat, says Canada did make some concessions to get a deal but it also made some important gains.

In terms of its impact on the economy, she says the new North American Free Trade Agreement is pretty much "a wash" for both Canada and the United States while Mexico got hardest hit.  Ambrose was a member of a panel Prime Minister Justin Trudeau asked to provide advice and help create a united multi-party front during negotiations with the mercurial U.S. president, who repeatedly threatened to tear up NAFTA if a new deal favouring the U.S. could not be struck.

Andrew Scheer, who took over the Conservative helm from Ambrose in 2017, has called the new NAFTA a "historic humiliation" that exposes Trudeau's weakness on the world stage.  Former Conservative cabinet minister James Moore was also on the advisory panel but he's refusing to comment on Scheer's contention that Trudeau caved in to Trump.

August 26, 2019
Roberto Chavez

Prime Minister Justin Trudeau took a shot at Canadian conservative politicians at the G7 summit in Biarritz on Monday when asked at a press conference about reports of U.S. President Donald Trump skipping a discussion on climate change.

“The President has made his perspective on climate change very clear,” Trudeau said when quizzed about Trump’s absence from talks that included the issue of Amazon rainforest fires. (Trudeau committed in his remarks to providing $15 million to the cause.) “We believe that climate is a real and existential threat to our planet,” he continued, citing his government’s carbon tax, phase-outs of coal and plastics.

“You cannot have a plan for the future of the economy unless you also have a plan to fight climate change,” he said. “Now, the president — and even some conservative politicians at home — seem to disagree with us on that, but I’m very much looking forward to the election, in which we get to have this conversation with Canadians.”

Climate change is gearing up to be a hot-button issue in the coming election, with the carbon tax especially emerging as a key dividing point between Trudeau and conservative leader Andrew Scheer, who has repeatedly pledged to scrap the levy.

August 20, 2019
Roberto Chavez

China’s move to stop buying several Canadian agricultural products has punished beef, pork, canola and soybeans farmers, and now industry leaders are worrying about the prospect of a broader threat — an eventual U.S.-China trade deal.

But a few Canadian crops have had stronger sales to China over the past year. The trade fight between the world’s two largest economies has, for example, helped contribute to a surge in Canadian wheat exports to China since Beijing imposed tariffs on American products. There are industry fears about what could come next — what will happen to Canadian farm exports if U.S. President Donald Trump and Chinese President Xi Jinping eventually strike a deal?

“If Trump forces China to buy a lot of American agri-food products, we won’t be selling Canadian agri-food products to China,” said Brian Innes, president of the Canadian Agri-food Trade Alliance. “Canada may benefit in the short term, but we’re going to get whiplash if Trump makes a deal with China.”

Innes said Trump has been clear that any trade agreement would feature major agricultural purchases by China from the U.S. At the moment, there are few signs of progress in U.S.-China negotiations. The trade war has grown increasingly bitter in recent months.

The two sides have hit each other with levies on hundreds of billions of dollars worth of goods. Last week, China announced it would stop buying American farm products in response to Trump’s threat of fresh tariffs on Chinese imports.  On Tuesday, however, the U.S. Trade Representative softened its position by announcing it would remove some Chinese products from a tariff list over “health, safety, national security and other factors.” Robert Lighthizer’s office also decided to delay the application of duties on certain products until Dec. 15, instead of the previous start date of Sept. 1.

Negotiators are expected to meet next month in Washington for another round of talks. Between January and June, federal numbers show Canada exported $335 million worth of wheat to China — an increase of more than 60 per cent compared to the same period in 2018.

August 9, 2019
Roberto Chavez

David MacNaughton, the U.S. ambassador who became the fulcrum of the federal Liberal government's strategy for managing relations with an impetuous and unpredictable White House, announced on August 8th that he plans to step down from the post at the end of the summer.

MacNaughton, who is vacating the job just weeks before Canadians go to the polls Oct. 21, said he intends to return to the private sector in Toronto. He'll be replaced on an acting basis by Kirsten Hillman, his deputy since 2017.

MacNaughton was a central player in the ensuing 13 months of talks to renegotiate the outdated trade pact, talks that culminated in a slightly retooled "new NAFTA" christened by Trump as the U.S.-Mexico-Canada Agreement. That deal has been approved in Mexico, but still awaits ratification in the U.S. Congress and on Parliament Hill.

July 29, 2019
Roberto Chavez

The U.S. House of Representatives began its summer break, leaving the ratification of the new North American trade deal hanging.  Trade experts are divided on whether Trump may be driven to invoke the six-month notice period to withdraw from the current North American Free Trade Agreement — a threat he repeatedly made during the renegotiation of the pact with Canada and Mexico. Lawrence Herman, a Toronto international trade specialist, said it is unlikely Trump would pull the plug on the new NAFTA so close to his own election campaign because it would sow economic uncertainty that wouldn't benefit him politically.

Dan Ujczo, the Ohio-based trade specialist with the firm Dickinson Wright, said it is unlikely Trump would serve notice to withdraw, but even if he did, Congress or the courts could step in to delay that. "The NAFTA will be in place through 2019. It is unlikely that companies will face a scenario where neither the NAFTA nor USMCA is in place during 2020," he said.

Mexico is the only country to approve the new deal, with Canada awaiting to see what the U.S. Congress will do. With the Democrats controlling the lower House, no ratification bill was tabled before lawmakers broke for their five-week summer recess— a scenario Trump and his cabinet worked hard to avoid.

The Democrats want changes to the USMCA's provisions on labour, environment, patent protection for drugs and enforcement, and have been working hard with Trump's trade czar Robert Lighthizer to move forward. But they haven't reached an agreement that would persuade the Democrats to bring a bill forward in the House.That makes it all but certain that U.S. lawmakers won't be in a position to take even the most tentative steps forward on the deal before the start of Canada's federal election campaign, which is set to begin by mid-September at the latest.

For some, that could mean fireworks for the Canadian campaign — ignited by a petulant Trump.

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