Carney says Canada's not pursuing free trade deal with China

Key Concepts

• USMCA Renegotiation: The potential for a challenging and unpredictable renegotiation of the United States-Mexico-Canada Agreement (USMCA).
• Trade Diversification: Canada’s efforts to diversify its trade relationships, particularly with China.
• National Security Tariffs: The use of national security concerns as justification for imposing tariffs, a tactic employed by the former US President.
• Trade Warfare: The escalating tensions and threats of tariffs between Canada and the United States.
• Market Impact of EVs: The potential impact of Chinese Electric Vehicles (EVs) on the Canadian and US automotive markets.
• Dumping: The practice of exporting goods at a price lower than their domestic market value, potentially harming domestic industries.

Canada-U.S. Trade Relations & Diversification Strategies

The interview centers on the increasingly volatile Canada-U.S. trade relationship, triggered by renewed threats of significant tariffs from the former American President. Lawrence Herman, an international trade lawyer, argues that these threats are not necessarily a direct response to specific statements, such as those made by Mark Carney in Davos, but rather stem from the unpredictable and “undisciplined and erratic” behavior of the former President, who seeks any pretext to pressure Canada. He emphasizes that the coming period will be marked by “uncertainty, instability, and serious elements of risk” in the Canada-U.S. trading relationship.

Herman dismisses the idea that the former President’s actions are rational or based on legitimate concerns, characterizing them as “aggressive tactics” leveraging the U.S.’s “enormous size and power.” He anticipates “very stiff demands” from the U.S. side during any USMCA renegotiation, presented on a “take it or leave it” basis.

China-Canada Trade Agreement & EV Impact

The discussion then shifts to the recent trade agreement between China and Canada, involving 49,000 vehicles. Herman expresses minimal concern, stating that the volume of Electric Vehicles (EVs) is unlikely to have a “major impact” on the Canadian market, which is a “multi, multi-million dollar” market. He stresses that the ultimate determinant of success will be consumer demand and the availability of efficient after-market service.

He also notes that existing trade laws, specifically those addressing unfairly subsidized trade (i.e., “dumping”), can be utilized to address any potential injury caused by these EVs. The concept of dumping – exporting goods at below domestic market value – is highlighted as a potential issue that can be addressed through established legal mechanisms.

Concerns Regarding U.S. National Security Tariffs & Trade Diversification

A key concern raised is the potential for the U.S. to raise concerns about Chinese goods, particularly cars, being “dumped” in Canada and then re-exported to the U.S. However, Herman downplays this risk, arguing that 49,000 EVs are unlikely to significantly impact the vast American auto market.

He warns that Canada must prepare for the possibility of continued use of “national security” justifications for tariffs by the U.S., regardless of actual security concerns. The former President is expected to “insist on the right to raise or lower tariffs, depending upon what he sees as U.S. national security interests.” This signifies a destabilization of established trading rules, potentially rendering them ineffective. Herman supports Mark Carney’s advocacy for Canada to actively pursue trade diversification, acknowledging that while the U.S. market remains crucial, Canada has “other options.”

He cautions that Canada may face similar pushback from the U.S. with any attempt to diversify trade, and anticipates a period of “very uncertain and unstable” conditions as long as the former President remains in office.

Domestic Pressure on the U.S. & USMCA Review

The interview touches upon the “Buy Canada” movement and Canadians reducing travel to the U.S., questioning whether Washington is feeling any pressure as a result. Herman acknowledges that while the impact is “isolated in various constituencies,” certain U.S. industries are being “seriously impacted” by the trade disputes.

He highlights the importance of Canadian businesses and the Canadian embassy actively engaging with their U.S. counterparts to emphasize the mutual economic stakes involved in a trade war. This proactive strategy aims to “moderate the worst impulses of the President and and his entourage.”

Notable Quotes

• “I don’t think what the Prime Minister said at Davos was the reason why Trump has threatened 100% tariffs. I think we’re dealing with someone who is undisciplined and erratic and would use any excuse to threaten Canada, as he has done recently.” – Lawrence Herman
• “It’s hard to imagine, given the size of the American auto market, that 49,000 EVS, even if a good portion of them somehow transited to the U.S. market, would have any impact whatsoever?” – Lawrence Herman
• “This is a new world that we’re involved in. The the trading rules have been destabilised completely. It might be out the window.” – Lawrence Herman

Technical Terms & Concepts

• USMCA (United States-Mexico-Canada Agreement): A free trade agreement governing trade between the three countries.
• Dumping: Selling goods in a foreign market at a price below their domestic market value.
• Tariffs: Taxes imposed on imported goods.
• National Security Exception: A clause allowing countries to impose trade restrictions based on national security concerns.
• EVs (Electric Vehicles): Vehicles powered by electricity.

Logical Connections

The conversation flows logically from the immediate threat of U.S. tariffs to a broader discussion of Canada’s trade diversification strategy. The analysis of the China-Canada EV agreement serves as a case study illustrating the potential benefits and challenges of diversifying away from the U.S. market. The discussion of “dumping” and national security tariffs highlights the potential obstacles Canada may face in pursuing its trade goals. The final point about domestic pressure on the U.S. underscores the importance of proactive engagement and advocacy.

Conclusion

The interview paints a pessimistic but realistic picture of the Canada-U.S. trade relationship under the former President. The key takeaway is that Canada must prepare for continued volatility and uncertainty, actively pursue trade diversification, and proactively defend its interests in any USMCA renegotiation. The emphasis on utilizing existing trade laws and engaging with U.S. stakeholders highlights the importance of a strategic and assertive approach to navigating the challenging trade landscape. Mark Carney’s advocacy for diversification is presented as a sound strategy, despite the inherent difficulties and potential for pushback from the U.S.