Canada out-gunned?

Photo: Contributed

“A trade war Canada will lose,” has been a common theme in recent Canadian media headlines after the United States announced a tariff of 25 per cent  on Canadian steel and 10 per cent on Canadian aluminum last week. 

In response, Canada has announced targeted tariff increases on a broad range of United States manufactured goods that are imported into Canada.
 
Is this a full-blown trade war?

At the moment, it is a tariff-related dispute designed to increase pressure on NAFTA negotiations.  

Having said that, I believe it is also important to be mindful of the year 2008 when the Canadian dollar not only reached parity with the U.S. dollar, but, for a brief period, it actually rose above it

I mention that because although the 25 per cent tariff on steel is both punitive and unfair to Canada, it ultimately negates the Canadian currency advantage that is around 23 per cent between the United States and Canadian dollars.

This tariff approach follows a similar pattern from the United States where Canadian softwood lumber exports were hit with a tariff up to 24 per cent, essentially wiping out the currency advantage that historically works in Canada’s favour.

As I have previously commented, I believe it is important to point out our Prime Minister has largely shown restraint in not getting involved in U.S. domestic politics, even though it would be politically convenient to do so. 

I believe most political pundits would agree that our Liberal government has made considerable effort to work proactively with the United States administration in several areas and I believe these efforts will continue.

As the official Opposition, we will continue to hold the Prime Minister to account for the failure to conclude a successful new NAFTA deal with the United States.

Some in Ottawa do not like this fact, however, it should be pointed out that holding someone accountable to produce results for Canadians is not necessarily the same thing as assigning blame.

In this case, we have a U.S. president who was elected in part with a promise to renegotiate trade deals such as NAFTA.

Here in Canada, we have a Prime Minister who has expressed an agenda to also change trade deals and promote “progressive trade values” that other countries continue to strongly reject.

In my view, we should recognize that in the event our Canadian dollar returns to parity with the U.S. dollar, either through natural market forces or through artificial means such as punitive tariffs, we will have to be able to compete.

On that note, a national carbon tax and increased payroll taxes that the United States does not have will make Canada less competitive.

Recent comments from the International Monetary Fund highlights the lack of Canadian tax competitiveness compared to the U.S.

I believe in the absence of a new NAFTA deal Canada needs to focus on measures that increase our international competitiveness. 

To date, the federal government and many provinces, including British Columbia with an incoming new health employers tax, will achieve the opposite.

My question this week relates to NAFTA:

• Do you believe Canada should show more flexibility to achieve a new NAFTA agreement or aggressively pursue the status quo?

I can be reached at [email protected] or call toll free at 1-800-665-8711.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.