In this episode, the Trade Guys and Andrew welcome another VIP guest. Kirsten Hillman, Canada’s Deputy Ambassador to the United States, offers her insight on Section 232 steel and aluminum tariffs, the USMCA (now dubbed “You-Smacka” by Trade Guy Scott), and more.
What We’re Reading
“Freeland says axing tariffs on steel, aluminum should be part of CUSMA ratification process”
“Foreign Affairs Minister Chrystia Freeland is linking the lifting of ‘absurd’ U.S. tariffs on Canadian and Mexican steel to the ratification of the new North American free-trade deal.”
“Dealing with the tariffs — imposed by President Donald Trump under a controversial national-security provision of U.S. law — is a key part of the ratification process, Freeland said Wednesday.”
“Freeland says she’s heartened by the recent comments of American lawmakers who say the new trilateral trade agreement can’t be ratified with the ‘Section 232’ tariffs in place.”
“Canada Won’t Ratify New Nafta Deal If Metals Tariffs Remain in Place”
“Canada is ratcheting up pressure on the U.S. to lift tariffs on steel and aluminum – threatening to hold up the new continental trade deal and change up its own retaliatory tariffs to have a bigger impact.”
“The U.S., Canada and Mexico signed their new trade deal Nov. 30, but it still needs to be ratified by lawmakers in all three countries and time is running out in Canada before the next election. There are increasing calls from U.S. lawmakers to lift the tariffs in a bid to smooth passage of the trade deal.”
“Canada’s foreign minister, Chrystia Freeland, this week issued a warning that Canada would only move forward on ratification when other countries do, and that it may change its tariffs on the U.S. Meanwhile, another envoy said flatly that Canada won’t move ahead on ratification so long as the U.S. tariffs remain in place, and that they fear U.S. President Donald Trump wants to keep the tariffs until the trade deal is ratified.”
Why it matters: It appears as though Canada won’t ratify USMCA until the U.S. steel and aluminum tariffs are removed which threatens to hold up President Trump’s signature trade victory. Canadian Foreign Minister Chrystia Freeland signaled as much during her last trip to Washington. Her position aligns with lawmakers in the United States, but it’s not clear what post-tariff arrangement would satisfy all three countries.
Key questions: Where are the negotiations over the steel and aluminum tariffs? Are Canada and Mexico willing to agree to quotas on steel and aluminum exports to the United States? What are the advantages of quotas over tariffs? Are the steel and aluminum quotas likely to be similar to the auto quotas negotiated in side letters to USMCA that provide for export growth from Canada and Mexico?
“New NAFTA deal ‘in trouble’, bruised by elections, tariff rows”
“More than six months after the United States, Mexico and Canada agreed a new deal to govern more than $1 trillion in regional trade, the chances of the countries ratifying the pact this year are receding.”
“The three countries struck the United States-Mexico-Canada agreement (USMCA) on Sept. 30, ending a year of difficult negotiations after U.S. President Donald Trump demanded the preceding trade pact be renegotiated or scrapped.”
“But the deal has not ended trade tensions in North America. If ratification is delayed much longer, it could become hostage to electoral politics.”
Why it matters: Elections in the United States and Canada are driving a shrinking window to ratify USMCA. Canada will hold a federal election in October while the United States 2020 election is nearing full swing. While trade agreements have been passed in election years before, the dynamic is usually does not lend itself to landslide votes for new trade deals.
Key questions: How large of a factor will USMCA be in the Canadian and U.S. elections, and how large of a factor will the elections play in USMCA’s fate? What are the chances the deal gets ratified before the U.S. election? Are there disagreements between Canada’s political parties over USMCA?
“US beef and pork squeezed in Japan by free trade alternatives”
“Japan is importing more pork and beef from European and North American free trade partners in a shift from the U.S. that may impact Tokyo’s upcoming trade negotiations with Washington.
“Japan’s pork imports from the U.S. fell 14% on the year in February, while imports from the European Union jumped 54% and from Mexico and Canada each grew nearly 20%, shows Ministry of Finance data out Thursday. The Japan-EU Economic Partnership Agreement, which took effect that month, lowered duties on certain pricey pork products to 2.2% from 4.3%, while tariffs on Mexican and Canadian pork are lower under the 11-member Trans-Pacific Partnership.”
“These free trade deals have created vast blocs excluding the U.S. that offer lower tariffs on agricultural and industrial goods. Japan is set to drop meat tariffs still further in April under the TPP-11. Pressure on the White House from disgruntled cattle ranchers will likely put more heat on Tokyo when the two sides sit down as soon as next month to hash out a trade agreement on goods.”
“US wheat and barley are losing Japanese market share fast”
“Next week is going to start off with a thud and not an April Fools’ Day joke when Japan further lowers tariffs on wheat and barley from Australia, Canada and European Union countries. Those nations’ exporters are already trying to steal U.S. market share in Japan and, come Apr. 1, Japan will make it even easier for them to do so as it follows through on promises in trade pacts that do not include the U.S.”
“That pact — the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) — officially started in December and the Japan-EU free trade agreement initiated in February. Japan reduced its tariffs and increased its quotas for barley and wheat immediately under both deals and is set to do so again Apr. 1.”
“Meanwhile, two years after President Donald Trump pulled the U.S. out of the Pacific Rim trade pact (back then it was just the Trans-Pacific Partnership, or TPP), the promised U.S.-Japan bilateral trade talks still have not begun.”
Why it matters: U.S. exporters of beef, pork, wheat, and barley are facing serious pressure in Japan as competitors that have inked trade agreements with Tokyo – including Canada – start to feel the benefits of those deals. U.S. beef and pork exporters have already seen their market share in Japan drop and more tariff cuts in that area for CPTPP and the EU are on the way. This raises serious questions about the long-term prospects of Japan as an export destination for U.S. agricultural products absent a quick trade agreement between Washington and Tokyo.
Key questions: Are Canadian exporters in a better position to serve markets in the Asia-Pacific and EU compared to U.S. competitors based on Ottawa’s free trade network? How concerned should U.S. agricultural exporters be now that Canada’s free trade agenda is coming to fruition? Will worse terms for U.S. exporters in Europe and Asia pressure USTR to act more quickly in those negotiations?