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Canada, EU to contest new U.S. tariffs in WTO


WASHINGTON, D.C. — Canada is asking the World Trade Organization’s (WTO) Agriculture Committee to confront the United States about remarks a USDA official made this spring about potentially using Commodity Credit Corp. (CCC) funds to help farmers counter losses incurred by export tariffs on their ag goods.

Canada has also joined the European Union in filing a challenge to U.S. tariffs on aluminum (10 percent) and steel (25 percent) imports that President Donald Trump threatened earlier this year, and put into effect last week.

Shortly after announcing the tariffs a few months ago, the administration exempted those countries and Mexico until at least June 1. And in mid-May, following talks between top U.S. and Chinese trade officials, it seemed a detente had been reached with China, too, pending further negotiations.

But when talks last week between European Trade Commissioner Cecilia Malmström and U.S. Commerce Secretary Wilbur Ross stalled, the White House authorized going ahead with the metal tariffs – with no exemptions – as of June 1. This was before Ross’ scheduled trip to Beijing last weekend for further trade talks between U.S. and Chinese officials.

Chinese Vice Premier Liu He issued a statement to Chinese news agency Xinhua about the talks, which ended Sunday, saying in part, “The two sides have had good communication in various areas such as agriculture and energy, and have made positive and concrete progress while relevant details are yet to be confirmed by both sides.”

But, “all economic and trade outcomes of the talks will not take effect if the U.S. side imposes any trade sanctions, including raising tariffs.”

National Public Radio reported that Malmström said the EU will consider "rebalancing measures," which could include neutralizing or retaliating against the U.S. with tariffs. "We are not seeking to escalate any situation," she said, "but not responding would be the same as accepting these tariffs, which we consider are illegal."

Friction with neighbors

Canadian Prime Minister Justin Trudeau outlined dollar-for-dollar retaliatory tariffs in a televised news conference Thursday that amount to $12.8 billion of U.S. exports to his country, to take effect July 1.

He said the U.S. has a $2 billion surplus in steel trade with Canada, and his nation buys half of U.S. steel exports. Too, it is a secure supplier of aluminum and steel to the U.S. defense industry. “That Canada could be considered a national security threat to the United States is inconceivable,” Trudeau said, listing conflicts in which U.S. and Canadian troops have fought and died as comrades.

“These tariffs will harm industry and workers on both sides of the Canada-U.S. border, disrupting linked supply chains that have made North American steel and aluminum more competitive around the world.”

Mexico has also promised equivalent tariffs on imported U.S. goods to what it will be charged, including flat steel, pork legs (ham) and shoulders, sausage, food preparations, apples, grapes, blueberries and cheese. For the pork industry, this threat comes on the heels of losses from tariffs imposed earlier in the year on their meat by China.

Last week, the National Pork Producers Council cited figures from Iowa State University Economist Dermot Hayes showing U.S. pork producers have lost $2.2 billion on an annualized basis (nearly $560 million per fiscal quarter) due to events leading up to and following China’s 25 percent punitive tariffs in retaliation for U.S. tariffs on aluminum and steel.

“Since March 1, when speculation about Chinese retaliation against U.S. pork began, hog futures have dropped by $18 per animal,” according to Hayes. “While not all of this lost value can be attributed to trade friction with China, it is certainly the main factor.”

An official Mexico statement said of U.S. tariffs “this type of measure under the criterion of national security is not adequate or justified. Steel and aluminum are inputs that contribute to the competitiveness of several strategic and highly integrated sectors in North America, such as automotive, aerospace, electrical and electronic, among others. Mexico is the main buyer of aluminum and the second of steel, in the United States.”

Both Canada and Mexico said their duties will stay in place for as long as the new U.S. tariffs on them exist.

“(Trump and Vice President Mike Pence) don’t quite understand that this is going to harm Americans,” Trudeau said. “It’s going to harm American workers and American companies. We emphasized how important the connections amongst our two economies are for both citizens of countries.

“Unfortunately, I think they will now discover that they cannot impose such measures without harming their own people and their own workers.”

Canada’s WTO challenge to tariffs was accompanied last week by a separate request for the body to investigate USDA officials’ remarks about finding ways to compensate U.S. farmers for losses stemming from tariff retaliation. According to a Reuters article, this goes back to CCC restrictions Canada says were lifted in the Bipartisan Budget Act signed into law on Feb. 9.

“Canada understands that the CCC can borrow up to $30 billion from the Treasury Department at any one time to stabilize farm income such as assisting farmers through loans, purchases, payments and other operations,” Reuters cited from the request. “Could the U.S. please provide the reasoning for lifting restrictions on the USDA’s authority to use CCC funds, and name the programs that will be eligible for these new funds?”

In April, USDA Deputy Secretary Steve Censky was quoted in various news reports as saying the administration was considering options the USDA may have under the CCC and CCC Charter Act. These included the purchase of surplus commodities to boost prices, subsidies for certain crops or buying goods for donation or school nutrition programs.

NAFTA news

The Mexican government stated it will continue with North American Free Trade Agreement (NAFTA) renegotiations despite tariffs. Trudeau said he was prepared to travel to D.C. last week to try to finalize a new pact, but in a phone call, Pence gave him a precondition for the meeting – that Canada agree to a five-year “sunset clause” that would allow any of the three nations to leave NAFTA at that time.

“I had to highlight that there was no possibility of any Canadian prime minister signing a NAFTA deal that included a five-year sunset clause, and obviously the visit didn’t happen,” Trudeau said, adding he told Pence if they were willing to take that off the precondition list, “I would be happy to come down – but that was not something that could ever be acceptable to Canada or, I’m fairly certain, to Mexico, in the negotiation.”

The White House stated on its website the May 29 phone call was “about ongoing efforts to modernize and rebalance (NAFTA) and the upcoming G7 Summit.” The Associated Press further reported Pence discussed preliminary issues the administration wanted clarity on before any meeting, including the sunset clause, according to a White House official who spoke on condition of anonymity to describe internal discussions.

The official told the AP a range of issues remain to be resolved, but that the U.S. looks forward to continuing negotiations with Canada.