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Just a week before US President George W. Bush arrives for a two-day working visit to Canada, the Canadian government has threatened to launch a trade war against the United States that could lead to duties that double the prices on a number of US goods.
Official sources said that trade is likely to be high on the agenda during Bush's visit at the end of the month. They believe the latest Canada-US row is the result of the US Byrd Amendment law being deemed illegal by the World Trade Organization.
Canadian ministry of International Trade said in a press release Tuesday that the government is launching consultations with Canadians on possible retaliation over American duties.
Jim Peterson, the federal International Trade Minister, said: "Clearly retaliation is not Canada's preferred option. However, this is about respecting the rules of international law."
Before any penalties are slapped on, however, the International Trade and Finance departments said they want to consult over the next month with businesses and other stakeholders on what measures the government should take.
The Canadian Ministry of International Trade said it is considering, among its options, a 100 percent surtax on a list of roughly 130 selected US-made products, with nearly a third from the lumber sector. Other items include seafood, a variety of beans and tobacco-related products.
US goods are being targeted because Washington has refused to repeal the Byrd amendment that the WTO deemed illegal back in January, 2003. The Byrd Amendment, which allows American companies to receive anti-dumping and countervailing duties collected from foreign competitors -- such as those on softwood lumber.
Since the law was enacted in 2000, it is estimated roughly US$800 million has been paid out to US-based makers of steel, candles, pasta and a host of other products. US payouts related to money collected from duties on Canadian goods totaled an estimated US$17 million from 2001 to 2003.
But of greater concern to Canada is the US duties of more than US$1 billion collected on Canadian softwood products the US authorities could start paying out to US lumber companies in 2007.
The WTO does not have the power to compel the United States or other member nations to repeal laws. However, the Geneva-based trade organization allows members to retaliate as long as a non-complying member fails to bring itself into conformity with its international trade obligations.
In August, the WTO gave the complaining countries permission to retaliate against the United States through sanctions of up to US$150 million a year, or 72 percent of trade affected by the Byrd amendment. Joining Canada in its complaint are the European Union, Brazil, Chile, India, Japan, Mexico and the Republic of Korea.
Trade sources said Canada is trying to send a message to the White House that it is "serious" about fighting back against American trade laws and Canada is trying to spark concerns among US manufacturers that sales are at stake. This, in turn, could force US companies to lobby legislators in Washington to comply with WTO laws.
The United States is Canada's largest trading partner. Canada's US-bound exports have tripled since 1989, the first year a free-trade deal between the two countries took effect. The two-way trade volume between the two countries is about US$42 billion a year.
Canada and the United States have a long-running trade dispute over softwood lumber, steal products, beef and wheat.
Canada last retaliated 18 years ago, after the United States raised duties on Canadian shingles. The two countries have had a free trade agreement since 1988. They added Mexico in 1994's North American Free Trade Agreement.
(Xinhua News Agency November 25, 2004)
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