The US has already established a USMCA dispute panel against Canada. Despite this, Canada is poised to pass Bill C-11 on third reading.
It seems that Canada is continuing to put the US on its ignore list with regards to Bill C-11, Bill C-18, and the Digital Services Tax. Late last month, we reported on the US issuing its 4th warning against Canada over the forthcoming pieces of legislation (for those keeping score: Warning 1, warning 2, and warning 3. To further punctuate the point, US Senators, in a bi-partisan letter to the USTR, separately called for the USTR to be “fully pursuing enforcement actions as necessary” in regards to the legislation. The CCIA, additionally, published white papers on why Bill C-11 and Bill C-18 are violations of the USMCA/CUSMA.
In short, the trade violations are obvious despite the Canadian government just saying that the legislation is in line with all of Canada’s international trade obligations or simply ignoring the issue completely. Of course, like a fire in the bedroom, the issue won’t go away just because you close the door and hope it all goes away on its own. If anything, you only make the matters worse. At this point, the fire alarm is blaring, the smoke is billowing into the rest of the house, and the neighbours are racing towards the house to try and rescue the homeowners. The warnings are obvious. There is no mystery going on here. Canada has a problem on its hands and it’s going to be increasingly difficult to ignore the issue – if not, downright impossible.
Some out there might be looking at the situation and say that the US wouldn’t really go through the formal process of filing a complaint against Canada or anything like that, would they? Well, just two days ago, they actually did on a separate issue. From the USTR:
WASHINGTON – United States Trade Representative Katherine Tai today announced that the United States is establishing a dispute settlement panel under the United States – Mexico – Canada Agreement (USMCA) regarding Canada’s dairy tariff-rate quota (TRQ) allocation measures. In this new panel proceeding, the United States is challenging Canada’s revised dairy TRQ allocation measures that use a market-share approach for determining TRQ allocations, and impose new conditions effectively prohibiting retailers, food service operators, and other types of importers from utilizing TRQ allocations. Through these measures, Canada undermines the market access it agreed to provide in the USMCA.
“Although the United States won a previous USMCA dispute on Canada’s dairy TRQ allocation policies, the Canadian government’s revised measures have not fixed the problem,” Ambassador Katherine Tai said. “With this panel request, we are utilizing our available tools to enforce our trade agreements and ensure that U.S. workers, farmers, processors, and exporters receive the full benefits of the USMCA. Canada made commitments to the United States in the USMCA, and the Biden-Harris Administration is ensuring that they honor those commitments.”
“Canada is a valued and important trading partner, but they continue to fall short of their USMCA obligations by denying U.S. dairy producers and exporters fair access to the Canadian market,” said Agriculture Secretary Tom Vilsack. “International trade is critical to economic growth and stability for American producers. This panel request is necessary to ensure Canada honors their commitments as they relate to dairy, and so American producers have greater export opportunities as intended.”
The United States has raised concerns under the USMCA previously about Canada’s dairy TRQ allocation measures. In December 2021, a USMCA dispute settlement panel found Canada’s dairy TRQ allocation measures to be inconsistent with Canada’s USMCA obligations. In response to the adverse findings of the panel, Canada introduced changes to its TRQ allocation measures, but these new policies are still inconsistent with Canada’s obligations under the USMCA.
Now, you might be wondering why the US hasn’t also made formal moves to sanction Canada over Bill C-11, Bill C-18, and the Digital Services Tax. One very likely reason is the fact that the legislation hasn’t been formally made into the law. It’s quite difficult to file a formal complaint against a country about an up and coming law. What’s more is the knowledge that the CRTC has to determine how to enforce something like bill C-11 which requires instruction from the government in the first place. No matter how you slice it, the US government doesn’t exactly have a lot of options beyond what they already did until the Canadian government implements their international trade violating law.
At this point, there are signals that Bill C-11 is going to be passing soon. As of now, the Canadian Senate is currently going through third reading. A number of observers are expecting it to pass later today. Probably the only silver lining in all of this is the fact that the Section 4.2 fix is likely to make it through the third and final reading. This does add some much needed clarity about user generated content, though it does nothing to allay the fears about trade retaliation from the US.
At any rate, the recent move by the USTR proves that the US can, and will, even today, move forward with a response against Canada if need be. The warnings and letters are by no means idle threats. With the Canadian government acting belligerently enough to simply ignore the warnings from south of the border, trade retaliation seems to be not a question of if, but when. If there are those that were waiting for evidence that the US was really going to initiate any sort of trade dispute, consider these recent developments the proof that you have been waiting for.
Drew Wilson on Twitter: @icecube85 and Facebook.
