Wednesday, August 31, 2005

Should Americans Take Canada Seriously?

By many measures, the U.S. relationship with Canada is its most important. After all, Canada is its most important trading partner and shares the longest border with the U.S. Yet how to explain the continuing recent war of words between the U.S. and Canada. After new U.S. ambassador to Canada David Wilkins chided the Canadian government for "emotional outburts" about the ongoing softwood lumber dispute, Canadian Industry Minister David Emerson provided this outburst:

Are we going to stand together? Are we going to unite? Are we going to be stronger than the sum of our parts, or are we going to endlessly be bickering amongst ourselves and allow the bully to basically mop the floor with us?

Not only are Canadian leaders furious, but they must even more furious that their fury is essentially being ignored by the U.S. media and public (as the NYT notes here).

Sometimes, the Canadian image of themselves being ignored and bullied by the U.S. is accurate. I don't think, though, that this is one of those cases. The U.S. actually has a somewhat defensible legal position, certainly more defensible than I first thought from reading Canadian media descriptions of the U.S. "ignoring" the NAFTA ruling. The U.S. does not believe that it has an obligation to comply with the most recent NAFTA decision on softwood lumber because the U.S. International Trade Commission made a new 2004 determination of (presumably new) injury caused by Canadian subsidies. This new determination was not examined in the NAFTA proceeding (which ruled on a 2002 ITC determination that was implemented. see here for the full NAFTA decision.). Moreover, that new 2004 determination was made in response to a WTO panel decision on this same dispute. Indeed, the WTO issued another ruling yesterday that backed up the U.S. position. Here is the U.S.T.R. spokesman's explanation of this interpretation here and a further statement here.

Bottom line: The Canadian government is definitely overreacting here by claiming that this lumber dispute is about respect or compliance with the NAFTA process. After all, the U.S. is acting here in compliance with the WTO process. So what we have here is a messy dispute flying back and forth between two different international dispute resolution systems which may or may not be in conflict with each other. In such a mess of a dispute, a negotiated settlement may be the more efficient solution.

Canadian leaders, however, prefer to whine about U.S. bullying and petulantly refuse to negotiate. All this pouting, however, is going to only reinforce Canada's image among Americans as a country we don't have to take seriously.


Anonymous Anonymous said...

It is nothing new that Canadians whine about the United States. I live near the border, watch their TV, and read their news, and I have been hearing almost nothing about the US but whining from Canadians for 40 years. The fact of the matter is that Canada is very heavily influence by US economic and political policies, but it has much less influence than, say, North Dakota, which has two members of the US Senate. This will continue indefinitely unless the Canadians decide to get themselves some Senators (by joining of course).

9/01/2005 1:30 PM  
Blogger trouble said...

I agree that Canadians are whining about how they are being treated on these issues by the US. Instead of whining, Canadians should learn from the US. If Canada perceives they are being 'hard done by' (right or wrong), they should take action (e.g. export tariffs on energy). Let the two countries battle (negotiate) on all their problems for years in international courts. This way everyone gets frustrated and annoyed.

9/29/2005 1:18 PM  
Blogger Shiv-ji said...

I think it would be wrong to say that Canadians are simply whining. Yes, we are complaining, but Canadians are doing much more than just that. Canada is re-evaluating its entire relationship with the United States. The Prime Minister has been spending time trying to develop trade relationships with India and China, the emerging Asian economies, as a way of reducing the amount of trade dependence we have on the United States. This notably (to Americans) includes creating trade relationships with China and India with our vast amounts of oil and natural gas wealth, which has historically been presumed to be accessible to Americans and may no longer be so.

What has not been mentioned in this blog is that the World Trade Organisation has largely American representation and staff, and very little Canadian representation. There is a power imbalance that naturally favours the U.S. over Canada. Further, when NAFTA was negotiated, the NAFTA dispute process was supposed to be final above and beyond all other processes. That means that a WTO ruling is not supposed to supersede a NAFTA ruling, and is not grounds to disobey a NAFTA ruling.

Canada does have the support of Mexico on this issue because Canada is not merely bickering. The U.S. has decided not to live up to the terms of the NAFTA treaty, selectively choosing which sections to abide by and which not to, and that has ramifications for all members of NAFTA. Consequently, Canada has been working out new trading relationships, which is a good long term strategy for our nation.

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