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OTTAWA \u2014 If U.S. President Donald Trump imposes tariffs on Canadian goods as he\u2019s repeatedly threated to do, experts say Canada has a strong case to challenge it under the Canada-U.S.-Mexico free trade agreement.<\/p>\n
The question, though, is how quickly any decision may come through the process \u2014 and more importantly, whether the U.S. would respect any decisions from the outcome.\u00a0<\/p>\n
\u201cA rules-based system is only as good as the willingness of the government who\u2019s subject to it, to comply with it,\u201d said Wendy Wagner, a partner at Gowling WLG.<\/p>\n
The free trade agreement is a nation-to-nation agreement, so there\u2019s no one else to appeal to if a country decides not to respect a decision.\u00a0<\/p>\n
America\u2019s past performance on adhering to trade decisions has been mixed. Areas of contention include complicated measures such as figuring out how much foreign content is in an automobile or the long-running softwood lumber dispute.\u00a0<\/p>\n
What Trump has threatened, though \u2014 blanket 25 per cent tariffs on Canadian goods, with the exception of 10 per cent tariffs on energy \u2014 doesn\u2019t contain much grey area, said Wendy.<\/p>\n
\u201cWe\u2019re not arguing around the edges here,\u201d she said.<\/p>\n
\u201cThere couldn\u2019t be anything more offensive to a free trade agreement than a 25 per cent across-the-board tariff on all the products that originate from that country. It\u2019s the most blatantly antithetical measure that you could impose.\u201d<\/p>\n
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The blatancy of the threatened measures do bring into question whether any ruling through treaty channels will have much impact, Wagner said.<\/p>\n
\u201cThere\u2019s a larger issue about the extent of adherence to a rules-based system, both internationally and domestically.\u201d<\/p>\n
The U.S. has already shown a disregard to findings in the past. When it imposed metal tariffs in 2018 the World Trade Organization ultimately ruled in favour of China that the move wasn\u2019t allowed, but the U.S. refused to comply.\u00a0<\/p>\n
Canada could also decide to challenge this round of tariffs at the WTO, as well as through CUSMA.\u00a0<\/p>\n
Based on the rules of the regional treaty, Canada could launch a challenge which would prompt mandatory consultations between countries within 30 days of filing the complaint.<\/p>\n
If there\u2019s no resolution through that step, the next would be to establish a dispute settlement panel. It acts as a sort of tribunal and goes through the process of hearing arguments and evaluating the evidence and produces a report on its findings.<\/p>\n
The time it takes to get through a complaint varies, but past cases have generally run around a year to a year and a half, Wagner said.\u00a0<\/p>\n
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The dispute panel\u2019s report sets out what the offending country needs to do to fix the trade issue.\u00a0<\/p>\n
If the U.S. didn\u2019t comply, then Canada would be allowed under the system to impose dollar-for-dollar counter measures.\u00a0<\/p>\n
This is something Prime Minister Justin Trudeau has already said the government will do as soon as the U.S. imposes tariffs, but technically Canada will also be in violation of the treaty if it imposes counter-tariffs ahead of the process.\u00a0<\/p>\n
While Canada may have to get ahead of the process to respond given the scale of the threat, it\u2019s still important it goes through the treaty steps to get to the same result, said Clifford Sosnow, a partner at Fasken Martineau DuMoulin.<\/p>\n
\u201cUltimately the result of the (grievance) process is compliance, and if there\u2019s no compliance, retaliation, and so in many ways, you\u2019re back to square one,\u201d he said.<\/p>\n
\u201cBut symbolically and legally, it has important aspects to it, because it effectively for Canada is an affirmation of the importance of the agreement.\u201d<\/p>\n
Going through the process will also force the U.S. to participate and submit to the process. That makes it harder for it to say it\u2019s abandoning the whole treaty, said Sosnow.<\/p>\n
\u201cEffectively it creates some stickiness between a president who\u2019s already poorly disposed towards the agreement, and at the same time affirms the legitimacy of the agreement.\u201d<\/p>\n
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For Canada, following the legal steps also affirms that the legal structure is the way to resolve disputes, he said.<\/p>\n
\u201cIn other words, a rules-based system as opposed to a power-based system. So there\u2019s both strategic value to this (and) there\u2019s symbolic value to it.\u201d<\/p>\n
A U.S. refusal to participate in the process would effectively renounce the whole treaty, a sharp contrast to Trump\u2019s apparent position that he wants a better version of the treaty he originally agreed to when negotiations open up on June 1, 2026.<\/p>\n
\u201cIt would be effectively a highly, highly controversial, and in fact I would suggest an unprecedented, repudiation of the agreement.\u201d<\/p>\n
A full abandoning of the treaty would be much more significant than Trump\u2019s tariffs, which he claims to be doing over national security concerns at the border. While the claims are tenuous at best, Sosnow said, they\u2019re at least still within the framework of the treaty.<\/p>\n
\u201cThe logic of that is very poor, the logic of that is very weak, but that\u2019s the tenuous connection to the agreement.\u201d<\/p>\n
When Trump last imposed tariffs on Canadian steel and aluminum in 2018, the process was resolved through counter-tariffs and diplomacy, not through the treaty process.<\/p>\n
The last round had Canada agree to several measures to limit exports of what the U.S. considered subsidized metal, but Sosnow said Trump has made it clear he\u2019s not interested in a measured solution.<\/p>\n
\u201cThat seemed to mollify the president (in 2018). Right now, the president is saying, \u2018I won\u2019t be mollified by that the second time around.\u2019\u201d<\/p>\n
\u00a92025 The Canadian Press<\/strong><\/p>\n<\/p><\/div>\n