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Trump understands that U.S. runs trade surplus with Canada: Chrystia Freeland

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OTTAWA – Foreign Affairs Minister Chrystia Freeland is taking aim a core assumption of Donald Trump‘s upcoming review of American trading partners – she said Friday the U.S. has a trade surplus with Canada, not the other way around.

Freeland’s assessment comes as Trump prepares to hold his country’s major trading partners to account. The president wants to determine which countries are using abusive trade practices to run export surpluses – and Canada is among those to be examined.

Trump was to sign an executive order Friday demanding a study within 90 days of all the ways other countries allegedly pull fast ones on the United States through anti-competitive trade practices.

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It will be a systematic examination of things like non-tariff barriers, lax legal enforcement, currency manipulation and other means that keep out American goods while other countries boost their own exports.

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There are about 16 countries on the list, which includes places with the biggest trade surpluses with the U.S. The biggest is no contest: China, with a US$347 trade billion surplus with the U.S. last year. That’s followed by Japan, Germany and Mexico and a list of U.S. allies like France, Italy, India and Thailand.

Of all the countries, Canada is listed as having the smallest surplus. It was the last of the countries that Commerce Secretary Wilbur Ross mentioned. U.S. government statistics show Canada even ran a trade deficit of US$11.9 billion with the U.S. in goods and services in 2015, before running a surplus in 2016.

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Freeland offered a different view.

“Canada is the single largest client of the United States and when you look at our overall trading relationship, counting goods and services, the U.S. runs a slight trade surplus with Canada,” said Freeland.

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“So I am really confident that the U.S. administration understands and will continue to understand that this is a relationship which is win-win and we’re going hard on both sides of the border to keep it that way.”

Freeland said she welcomes Ross’s attempt to create a “fact-based foundation for U.S. trade policy” and characterized the latest review as “routine.”

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Prime Minister Justin Trudeau said he’s also happy with the fact that the U.S. “regularly assesses what its partners are doing and what’s going on in the trade relationship.”

Trudeau said his government will continue to impress on the Americans that the relationship means jobs in both countries.

“The relationship between Canada and the United States is unlike the relationship between any two countries in the world,” he said Friday.

Trudeau and his cabinet have mounted a full-court press on Washington to drive home that message and that’s not about to stop now, as businesses and provincial and municipal governments continue their efforts in tandem with Ottawa, he said.

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The goal of the Trump study is to quantify exactly how much of the U.S. global trade deficit is due to supposedly unfair practices, and seek remedies for the imbalance.

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“There has never been this kind of systematic analysis,” Ross said at the White House. “It will be very heavily based on an empirical framework.”

Ross stressed that he isn’t singling Canada out.

Ross acknowledged an obvious reason for that Canadian surplus: oil. American energy consumption patterns require it, and that results in millions of barrels a day in imports that can’t easily be waved away by executive order.

“Undoubtedly we’ll conclude that with some of the countries no action should be taken,” Ross said.

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“A lot of what Canada’s deficit comes from is oil.”

When oil prices rise, Canada habitually runs a trade surplus with the U.S; the opposite happened in 2015 when they dropped.

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If Canadians want clues about what the study might find, they already exist.

The U.S. already publishes annual studies chronicling its trading partners’ alleged abuses. Ross, in fact, claimed Thursday that no country trades as freely as the U.S. – including some others that like to brag about how they’re supposedly free traders.

“Its findings reinforce the need for the president’s America First trade agenda,” White House spokesman Sean Spicer said Friday.

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The latest U.S. report on trade barriers complains about Canadian dairy and poultry controls; limits on U.S. wine in grocery stores; aerospace support; telecommunications; the relatively minuscule $20 duty-free limit on goods purchased online; and limits on American companies’ ability to supply some services to some Crown corporations, singling out Hydro Quebec.

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Oil and vehicles account for almost half of U.S. goods imports from Canada.

Softwood lumber represents a smaller share. But it’s a significant source of Canada-U.S. trade disputes, and could be the source of yet another one: Trump is signing a second executive order Friday and it involves toughening the system for collecting anti-dumping and countervailing duties in trade disputes.

The orders come as the U.S. prepares to open NAFTA negotiations later this year.

– With files from Alexander Panetta in Washington