Thursday, August 18, 2005

Even More Reasons for Canada to Hate Us

U.S.-Canada trade relations appear to have hit a new low as Canada has suspended further settlement talks over U.S. tariffs on Canadian softwood lumber. This may sound fairly trivial compared to some of the rather momentous topics that Prof. D'Amato has treated Opinio Juris readers to over the past week and a half, but I think the problems Canada is having enforcing the NAFTA tribunal's judgment against the U.S. demonstrates that limits of even international trade law in forcing compliance by powerful countries.

In this case, the U.S. is refusing to abide by a NAFTA panel ruling this week finding its tariffs on Canadian lumber a violation of NAFTA requirements. Although the NAFTA system has reached a final judgment, the U.S. has still said it will not comply and that it wants to negotiate a separate settlement. In essence, the U.S. has lost, it has no more appeals left, but it wants to force Canada into a settlement anyway. What card does it have left to play? Open defiance with the NAFTA tribunal judgment.

As Professor D'Amato has pointed out, U.S. defiance here and in other international law regimes is not costless. For one thing, the U.S. will have a harder time getting Canada to comply with adverse NAFTA tribunal judgments, and the U.S. does often win, as it did today in a NAFTA Chapter 11 Tribunal's ruling upholding a California environmental regulation against a Canadian challenge. But it may be that the U.S. is simply willing to pay that price, and though I think this is a bad policy, I'm unaware of any domestic legal mechanism that requires the U.S. to comply with the NAFTA tribunal judgment.


Blogger D'Amato said...

Canada could learn from the European Union's threatened retaliation against the US when the US failed to comply with the WTO's prohibition against raising steel tariffs. The Europeans simply picked out a US export to retaliate against that would hit President Bush personally. They selected oranges, thus threatening to hurt Jeb Bush. When the US heard of it, we dropped the excess tariffs on steel. President Bush told the American steelworkers that the American tariff had done its work, steel prices were a lot higher, and so there was no need to continue with the tariff. (All of which, of course, had nothing to do with the fact that steel prices went up because of Chinese demand.)

I'm sure Canada can find a "sensitive" area for retaliation. If it's done subtly and under an ostensible claim of rigbt, the way the Europeans did it, it could be an illustration of what I was calling "tit-for-a-different-tat."

8/18/2005 8:17 PM  
Anonymous Fernando R. Teson said...

I agree with both Ku and D'Amato. My view on the much-talked-about issue of the US disregarding international law is this: when the US is trying to do the right thing (and it's an impertaive "thing" like defeating ferocious enemies) and formal rules prevent the US from doing it, then the US, I contend, is right in ignoring what passes for international law (e.g., a Security Council veto). But, as is the case in NAFTA, when the US ignores a ruling simply because of rent-seeking pressure by local industry (which is not even self-interest, as the majority of Americans benefit from available cheaper Canadian lumber) then it has no excuse. None. NAFTA was a great triumph of economic liberalism against the reactionary forces of protectionism (and President Clinton deserves great credit). It's an irony that Republicans, who, last time I heard, were for laissez-faire, are doing this. And yes, Canada should retaliate, because the US reacts to that IF the trading partner is strong enough.

8/18/2005 9:14 PM  
Anonymous Anonymous said...

this will be very interesting. the US lumber industry will now, I predict, file a challenge to NAFTA itself, arguing that its adoption as a Congressional-Executive Agreement rather than a treaty was unconstitutional. The industry came close to doing so in the last iteration of this dispute, in 1994, but backed off after a settlement between the govenrments. They hired LArry Tribe to represent them and he was prepared to argue, as he eventually wrote in his article "Taking Text Seriously" that C-E agreements are not provided for in the Constitution and that the Constitutional provisions on treaty adoption must be followed. His antagonist, at least for academic purposes, was Bruce Ackerman, of the "constitutional moment" theory that at certain points in US history political events have effectively amended the Constitution, including the creation of new forms of int'l agreements. (full disclosure--I used to work on this case a few years ago, on the US industry's side). The case will then have a lot of implications for for foreign affairs law.

8/23/2005 2:21 PM  
Anonymous Anonymous said...

I can't wait for the US to pull out; I used to think it was great, but right now I hope we Canadians pull straight out of NAFTA too. There's no reason we should be paying $1/litre (and rising) for our own gas. Let us tax all energy exports to the states and use the money to compensate affected industries here in Canada, and subsidize our own domestic gas and energy prices.

I say it's better to screw any trading partner who tirelessly pisses all over their agreements, than to sit back and watch us go the way of Zimbabwe when we can no longer afford our own gas.

8/24/2005 4:44 AM  
Anonymous Anonymous said...

I'm Albertan by the way, so if anyone close to the vast majority of Canada's oil disagrees with my comments, please don't pass me off as some stereotypical eastern activist.

Albertans should stick up for their country from time to time, especially if this situation eventually becomes a crisis. I don't, for the time being, think the Americans are very interested in sticking up for us, and wouldn't even if Alberta became their 51st state as some people here fantasize.

8/24/2005 5:00 AM  
Anonymous Steve said...

The Canadians have been whining about one US policy or another for as long as I can remember (over 40 years). Some of their complaints are valid -- maybe this one -- and some are not. But the problem is that Canada is often tremendously influenced by US decisions, especially on economic matters, but it has no say in those decisions. Even North Dakota, much smaller than Canada, has a larger say in US decisions due to having two members of the US Senate. If the Canadians want a say in US policy they need to join.

8/24/2005 6:38 PM  
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