The USMCA’s fatal flaw: ‘national-security’ tariffs

By Ken Neumann
Special to the Globe and Mail

Ken Neumann is the United Steelworkers’ national director for Canada

Lost in the debate on the Canadian government’s many concessions in the proposed United States-Mexico-Canada Agreement – “Canada gave very graciously,” as U.S. President Donald Trump’s economics adviser gloated – are disturbing provisions allowing Mr. Trump and future U.S. presidents to continue to impose baseless “national-security” tariffs on key Canadian exports.

When the USMCA was announced last week, it was both shocking and profoundly disappointing to see Canadian officials toasting this new trade deal while the United States maintained devastating tariffs on Canadian steel and aluminum exports.

The Trump administration imposed the tariffs – 25 per cent on Canadian steel and 10 per cent on Canadian aluminum – on June 1, on the spurious basis that these imports pose a threat to U.S. national security under Section 232 of American trade law.

For the 175,000 Canadian workers whose jobs are directly or indirectly tied to the steel and aluminum industries, these tariffs represent a serious threat to their jobs and communities. From the outset, the United Steelworkers, the union representing steel and aluminum workers on both sides of the border, condemned these tariffs and questioned the direction of American trade policy.

While imposing the tariffs, Mr. Trump explicitly noted they could be lifted if Canada and the United States could agree on a new trade deal to replace the North American free-trade agreement, hence the shock in Canada when the Trudeau government agreed to the USMCA even though the unjustified U.S. tariffs are still in effect.

Of course, the Canadian government expressed dismay that the tariffs remain in place. Foreign Affairs Minister Chrystia Freeland has attempted to justify the situation by arguing steel and aluminum tariffs remain a separate discussion from the USMCA negotiations. However, even a cursory examination of the agreement reveals this is clearly not true.

In fact, the USMCA validates and makes several accommodations on U.S. national-security tariffs.

First, while the USMCA leaves room for significant growth of Canadian auto exports, it does not close the door to future Section 232 tariffs. Second, there is a new protocol for the imposition of future U.S. national-security tariffs against Canada, without eliminating the current Section 232 tariffs on our steel and aluminum exports.

What is most disconcerting is that these provisions essentially legitimize the right of the U.S. president (the U.S. Congress has little say on the matter) to impose more “national-security” tariffs against Canada in the future.

For example, the United States has initiated a Section 232 investigation into uranium imports. Canada is a significant exporter of uranium to the United States. Workers in Canada who mine and process uranium should be very concerned, because our government has essentially agreed to a process for the United States to impose Section 232 tariffs on Canadian uranium exports.

The notion that Canadian exports of steel, aluminum or uranium pose a threat to U.S. national security has no basis in fact. Canada and the United States have a long-standing relationship that ensures economic co-operation in the event of threats to national security. So why, then, is Canada agreeing that such tariffs can be imposed?

While trade negotiations with the Trump administration were no doubt challenging, in the end it seems the Trudeau government and certain stakeholders were relieved they had preserved protections for some parts of the Canadian economy.

Most notably, Prime Minister Justin Trudeau and Ms. Freeland have cited the preservation of the Chapter 19 dispute-resolution mechanism as a key achievement. But Chapter 19 provides no protection against U.S. national-security tariffs.

The new USMCA will be a key determinant of the entire economic relationship between Canada and the United States for decades to come. For hundreds of thousands of Canadian workers in industries now vulnerable to U.S. tariffs, a key question must be answered by their government: Why does this new trade agreement allow protectionists south of the border to impose punishing tariffs on Canadian industries without any basis whatsoever?

Canadians also can rightfully ask parliamentarians to think twice about ratifying a trade agreement that contains such a fatal flaw, on top of all the other concessions made by their government.