Report casts doubt on value of protecting Chapter 19 in Cda-US trade talks

James McCarten, The Canadian Press</span>
Published Monday, October 22, 2018 3:37PM EDT

WASHINGTON -- The dispute-resolution tool that consumed so much energy during NAFTA talks with the United States has a middling record of defending Canadian exporters, a new think-tank report says -- raising questions about what the federal government gave up to preserve it.

Chapter 19, as the 30-year-old mechanism is known, provided Canada a degree of relief in only 12 out of 54 complaints filed against the U.S. since 1994 -- the last one 15 years ago, says the report, to be released Tuesday by the left-wing Canadian Centre for Policy Alternatives.

And when it comes to Canada's most significant current irritant -- U.S. President Donald Trump's Section 232 tariffs on steel and aluminum exports -- it's been no help at all, said Scott Sinclair, the report's author.

"I think Canada got caught up in the symbolism of preserving the Chapter 19 panel reviews, and its record of success for Canadian exporters has been pretty modest, and that's diminished over time," Sinclair said in an interview.

While the way the U.S. applies its trade remedy laws may have been top of mind during the heady days of softwood lumber disputes in the 1980s and 1990s, the clear and present danger now is Section 232, which allows the president to use national security as justification for tariffs.

"We've moved into a new phase, these 'national security' safeguards. NAFTA Chapter 19 doesn't provide any protection against those whatsoever," Sinclair said.

"It may be that Canada could have used its leverage, which I think was pretty strong at the very end of the negotiations, to get a better resolution on the current major threat, which is those safeguards."

The federal Liberal government has long defended its Chapter 19 commitment as more important than ever, considering "we have a president who doesn't always follow the rules as they're laid out," Prime Minister Justin Trudeau told an Edmonton radio station last month.

But talks to get Trump's tariffs lifted, as well as to mitigate his threat of a crippling 25 per cent tariff on autos, have so far yielded no success.

Despite recent media reports suggesting a deal was close, insiders say otherwise -- especially since the U.S. is trying to get Canada to agree to export quotas, something Foreign Affairs Minister Chrystia Freeland made clear last week is a non-starter.

"It's not as far along as people are letting on," said Dan Ujczo, a specialist in international trade with the Ohio-based law firm Dickinson Wright. "I do think Canada has a problem with quotas, but I don't know how you get around it without them."

There's little motivation right now for the U.S. to resolve the problem quickly.

Despite the fact it remains a popular talking point in Canada, the U.S. has largely moved on from North American trade, focusing instead on the looming Nov. 6 midterms, as well as the death of Washington Post columnist Jamal Khashoggi at the hands of Saudi Arabia and the march of some 5,000 South American migrants towards the Mexico-U.S. border.

That latter issue has seized the attention of the White House, giving the anti-immigration president a whole lot of red meat to galvanize his political supporters.

"The assault on our country at our southern border, including the criminal elements and DRUGS pouring in, is far more important to me, as president, than trade or the USMCA," Trump tweeted last week.

Then, on Monday, he promised to "begin cutting off, or substantially reducing," foreign aid to Guatemala, Honduras and El Salvador for what he characterized as their failure to keep the so-called "caravan" of migrants at bay.

All of which makes clear -- if it wasn't already -- that it can be difficult, if not impossible, to anticipate and protect against the unpredictable whims of America's famously capricious commander-in-chief.

"It's hard to know for sure, but I wonder if Canada had pushed harder on the safeguards issue, or some of the intellectual property issues or on supply management, and yielded some ground on NAFTA Chapter 19, whether we could have had a better outcome," Sinclair said.

"It has benefited some Canadian exporters, but it's overrated in terms of its ability to constrain outbursts of U.S. protectionism."

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