US NAFTA Nemesis: Canada, Not Mexico

The United States and Canada are one of the largest trade relations in the world.

President Donald Trump met with Canada’s Prime Minister Justin Trudeau for the first time on Monday.

“We have a very good trade relationship with Canada,” Trump said in a press conference.

However, the US-Canada trade relationship over the years has not been as smooth as you might think. There were trade wars, retaliation, allegations of dumping, and unemployment.

Stuart Trew, editor of the Canadian Policy Alternatives Center, a research group in Ottawa, the capital of Canada, said:

Trump often blamed Trade agreements between Mexico and NAFTA, the United States, Mexico and Canada. However, Canada is rarely mentioned.

Still, there were more claims of NAFTA disputes against Canada (almost all by US companies) than Mexico. Even today, Canada imposes strict tariffs on the United States, and both sides have just settled a fierce meat dispute.

Most leaders and experts emphasize that trade relations between the two countries are strong and mostly positive. However, Canada and the United States fought a lot along the way.

Now, Trump wants to renegotiate with NAFTA, which is at the top of the agenda for the meeting with Trudeau.

1. Canada has more NAFTA issues than Mexico

Listening to Trump, you might think Mexico is a villain of NAFTA. However, since the inauguration of NAFTA in 1994, 39 complaints have been filed against Canada, almost all by US companies. Known in the industry as Investor-State Dispute Resolution, companies can resolve matters under a special committee of Judge NAFTA rather than in the district courts of Mexico, Canada, or the United States.

There are only 23 complaints against Mexico. (By comparison, both Mexican and Canadian companies have filed a total of 21 complaints against the United States.)

And more and more, Canada is the subject of American complaints. Since 2005, Canada has been hit by 70% of allegations of NAFTA disputes, according to Canadian research firm CCPA.

2. US-Canada Lumber Battle

NAFTA is not the only area that hurts. In 2002, the United States imposed a tariff of about 30% on Canadian timber, claiming that Canada had “dumped” timber into the US market. Canada rejected the claim, claiming that tariffs required 30,000 jobs for the lumber company.

Tom Berg, a professor of economics at McGill University in Montreal, said:

The controversy began in the 1980s, with American lumber companies saying Canadian lumber companies weren’t playing fairly.

Whether Canada actually broke the rule is a matter of controversy.

Canadian authorities have denied that the government is subsidizing a Canadian coniferous lumber company. American sawmills still claim to be so, and the US Department of Commerce reported that Canada provided subsidies to sawmills in 2004. It is not clear if the subsidy is continuing.

Canada allegedly subsidized a lumber company because many of its timber producing areas are owned by the government. The subsidy, in addition to Canada’s vast timber supply, allowed Canada to buy timber at prices lower than US companies could charge.

The World Trade Organization eventually endorsed Canada, denied the US claim, and in 2006 the two sides reached an agreement to end tariffs.

However, the agreement and the subsequent grace period expired in October, and both sides returned to the agreement again. The Obama and Tordo administrations couldn’t reach a compromise before Obama resigned, a controversial trade issue in which US lumber companies demand tariffs again.

Related: “Without NAFTA” we will be out of business

3. Smoot-Hawley Causes US-Canada Trade War

Things got worse during the Great Depression. In 1930, Congress wanted to protect US employment from world trade. So the United States slapped tariffs on all countries that shipped goods to the United States to protect workers.

It was called Smoot-Hawley method. Today, it is widely accepted that this law has made the Great Depression worse than it used to be.

Canada was furious, retaliating against the United States more than any other country and causing a trade war.

According to Doug Irwin, a professor at Dartmouth College and author of “Peddling Protectionism: Smooth-Hawley and the Great Depression,” “Canada was so angry that it raised its own tariffs on certain products and raised new US tariffs. I matched it with the tariffs. ”

For example, the United States has raised tariffs on eggs from 8 cents to 10 cents (after all, these are 1930s prices). Canada has also retaliated by raising tariffs from 3 cents to 10 cents. This is a triple increase.

Exports have fallen sharply. In 1929, the United States exported about 920,000 eggs to Canada. According to Irwin, three years later, only about 14,000 eggs were shipped.

Related: Remember Smoot-Hawley: America’s Last Major Trade War

High Canadian Tariffs on US Eggs, Chicken and Milk

Fast forward to today. Smoot-Hawley is a long time ago, but Canada continues to impose high tariffs on imports of eggs, chicken and milk from the United States.

For example, tariffs on some eggs are as high as 238% per dozen, according to To the Canadian Agricultural Department. Depending on the fat content, some milk imports can be as high as 292%.

“They are so annoying that you can’t cross it. There are no American eggs in Quebec,” Velk says.

According to the Canadian Embassy in the United States, the reality is very different. Despite some strict tariffs, Canada is one of the largest export markets for milk, chicken and eggs in the United States, officials said.

The United States imposes tariffs on some goods from all countries, but they are not as high as those in Canada.

According to experts, these tariffs continue to frustrate some US dairy and poultry farmers, some of which are challenging to sell to the Canadian market. But as tariffs have been in place for decades, they doubt much will change.

Related: Reagan’s tariffs that Trump loves to talk about

5. The future of cooler heads and NAFTA

Despite all these controversies, experts emphasize that this trade relationship remains one of the best in the world.

In fact, the two countries are now very interrelated, as US companies may oppose Canadian companies and US lawmakers when a trade dispute breaks out.

For example, Canadian meat producers have challenged US law that requires cattle to be labeled where they were born, raised, and slaughtered. Canadians said the law discriminated against selling the meat in the United States and filed a proceeding with the WTO.

The WTO endorsed Canada, and in December last year Congress abolished the country of origin labeling law. American meat producers (whose business is intertwined with Canada) actually supported their counterparts in Canada, claiming that the regulations were too burdensome.

Regarding Trump’s proposal to dismantle NAFTA, many US and Canadian experts say it’s not worth renegotiating or terminating the agreement. The three countries that are part of the agreement are so intertwined with each other that breaking the integration will have a negative impact on trade and economic growth.

-Editor’s Note: This article was first published on August 11, 2016. Then it was updated.

CNNMoney (New York) February 13, 2017 First Edition: 11:11 AM ET

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