March 2, 2018 8:06 pm

Steel tariffs: Why NAFTA doesn’t protect Canada from Trump’s decision

WATCH: Prime Minister Justin Trudeau said Friday that he has spoken in the past with President Donald Trump about the close U.S.-Canada trade ties, but did not provide details on any immediate talks with Trump in response to proposed tariffs placed on Canadian steel and aluminum.

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U.S. President Donald Trump’s recently-announced tariffs on aluminum and steel imports have received a negative reaction from both Canadian and American businesses.

While the North American Free Trade Agreement (NAFTA) was designed to create a free-trade zone between Canada, the United States and Mexico when it was signed in 1994, it doesn’t include any provisions to protect against this decision.

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“NAFTA doesn’t stop things like the steel safeguards that are being proposed under a pretty obscure provision in the U.S. law that hasn’t been used in a very, very long time,” explained Jesse I. Goldman, a trade and commodity taxation lawyer and partner at Bennett Jones LLP.

He adds that while special dispute resolution mechanisms are built into NAFTA to help deal with trade decisions like this one, there’s no guarantee Canada will use them.

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“It’s intended to secure national security. There’s nothing in the NAFTA that prevents the U.S. from doing it. NAFTA does have special dispute resolution mechanisms that could deal with U.S. trade actions. Whether Canada would take advantage of those or not, I don’t know.”

Prime Minister Justin Trudeau has come out against the Trump administration’s decision, calling it “absolutely unacceptable.”

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“The United States has a $2-billion surplus on steel with us, so we regard the imposition of any new tariffs or any tariffs on steel or aluminum between our two countries as absolutely unacceptable,” said Trudeau.

Trudeau also rejected the U.S. claim that there’s a national security imperative to impose these duties due to the existing level of security co-operation between Canada and the United States.

“The level of co-operation and integration of our militaries, our defence of North America and our working together on a broad range of security issues means that it just makes no sense to highlight that Canada and Canadian steel or aluminum might be a security threat to the United States,” he said.

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Goldman added that the Trudeau government’s argument that Canadian steel and aluminum are integral to defence industries in the U.S. is a legitimate one.

“For example, Canadian aluminum goes into fighter planes and bombers that are manufactured. So Canada is making the argument that access to its aluminum is essential to its national security, it doesn’t jeopardize it,” said Goldman.

The Canadian union Unifor came out against the tariffs this week, calling them “unjust” and “punitive.”

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The union representing more than 40,000 workers in the auto industry and thousands more working in the steel and aluminum sectors (including 1,000 at Rio Tinto in British Columbia and 3,000 aluminum workers in Quebec) called on the Trudeau government to take all measures to protect Canadian jobs. 

In addition, the International Monetary Fund spokesman Gerry Rice said the restrictions will likely damage the U.S. economy, including the manufacturing and construction sectors that are major users of aluminum and steel.

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“We are concerned that the measures proposed by the U.S. will, de facto, expand the circumstances where countries use the national-security rationale to justify broad-based import restrictions,” he said in a statement.

Goldman concludes that while it’s possible the U.S. could grant Canada an exception to these duties, there haven’t been any indications so far that this will happen.

“The U.S. is talking about a global safeguard, potentially against all countries. It remains to be seen whether there are going to be any exemptions.”

© 2018 Global News, a division of Corus Entertainment Inc.

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