A new letter to the USTR by a bi-partisan list of US lawmakers is urging an immediate response to Canada’s Digital Services Tax.
After years of warnings and letters from the US, the Canadian government simply chose to ignore all those warnings and threats and implemented the Digital Services Tax. Observers everywhere gave a collective facepalm to the Canadian government for their apparent obliviousness and failure to learn from history of what happens when you ignore experts and pretend that the invariable consequences of your actions simply don’t exist.
As I’ve been saying ever since the Digital Services Tax was implemented, it’s not a matter of “if” there is trade retaliation from the United States, but “when”. The Canadian government under the Trudeau Liberal government isn’t exactly known for learning things the easy way. Instead, it seems to be required that the Canadian government learns the hard way instead. A newly published letter from US lawmakers is more than happy to oblige Canada on this front. In a letter from the powerful Committee on Ways and Means, US lawmakers from both sides of the political aisle is urging the United States Trade Representative to take “quick and decisive” action against Canada for, well, basically acting like idiots. From the letter (PDF):
Dear Ambassador Tai,
We call on the Biden Admnistration to deliver a quick and decisive response to Canada’s decision to move forward with a discriminatory digital services tax (DST). The United States cannot permit trading partners to levy taxes that uniquely target our firms and workers. It is time for this Administration to make clear that the United States will defend our interests by immediately initiating an investigation of Canada’s DST under Section 301 of the Trade Act of 1974.
Canada’s decision to unfairly target U.S. companies runs counter to our substantial bilateral economic, diplomatic, and security relationship. We appreciate your past attention to this issue and desire to “examine all options” should Canada continue to pursue its DST. Given Canada’s decision to enact its DST on June 19, despite significant U.S. concerns expressed by Congress, USTR, and the Treasury Department, the time has come to make clear to Canada’s political leadership that the United States is done examining options and will act decisively to protect American workers, small businesses, and innovators.
We support continued engagement with the Government of Canada regarding DST implementation. To date, however, talks have been ineffective and Canada has not changed course at all. We strongly urge you to make clear that unilateral and discriminatory DSTs are unacceptable and immediately initiate an investigation under Section 301. A weak response from the Biden Administration will harm American interests, lead to a proliferation of similar measures, and allow Chinese companies to gain a foothold in the markets of our closest trading partners.
Yes, those lawmakers are so pissed off, they missed an “i” in “administration”.
Joking aside, though, some people out there might be thinking that I’m exaggerating how motivated the American’s are at enacting trade sanctions against Canada over this. This letter only provides further evidence that there’s absolutely no exaggeration here. It’s also further evidence as to why I think it’s inevitable that Canada is going to get slapped with these trade tariffs. In that letter, those lawmakers knew exactly who the blame lies squarely on as well:
It is disappointing that Canada seeks to erode the durability of our bilateral economic relationship. The size and scope of the relationship are something for both countries to be proud of. Yet Ottawa insists on moving forward with a policy of unique discrimination and unreasonableness, while rejecting multilateral efforts to eliminate DSTs. Given the urgency of the issue and the significant potential economic impact on American workers, we expect an immediate and vigorous use of your available tools to push back on this problematic tax.
Honestly, I can’t disagree with this. The problem lies squarely on Canada on this one.
What’s more, Canada will have no defence against such tariffs as well. All this leads to is wondering who in Canada will wind up being collateral damage in all of this. Someone is going to pay the price of Trudeau’s belligerence on this file. After all, it is why the business community has been begging and pleading and crying for the government not to go through with the Digital Services Tax. When those cries for basic sanity went ignored, that community could only respond to the situation with a “we’re f*cked” statement afterwards. At this point, I don’t think there’s anything that community can do, really.
All of this is just further evidence that trade sanctions against Canada are coming. The only real question is when they’ll actually hit and in what form. As far as the Ways and Means committee is concerned, Canada should be slapped with tariffs as soon as possible. So, those gears are definitely turning at this point in time.
Everything about this situation was entirely avoidable. Canada could have waited patiently for an international agreement to be made on these issues. They chose not to. Canada could have heeded the warnings of the American government. They chose not to. Canada could have listened to the experts who said that these are very real threats to Canada. They chose not to. Now, Canadians are all but certain to pay the price for the governments belligerence. It’s yet another mess the Canadian government has created on technology policy. These days, it seems that the government has become increasingly efficient at making such messes as well.
(Via @MGeist)
