JAY GOLDBERG: Canada should be listening to United States trade grievances |
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JAY GOLDBERG: Canada should be listening to United States trade grievances
Canada would be in a deep recession today if such a large portion of cross-border trade weren’t protected by the CUSMA.
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Prime Minister Mark Carney has consistently argued that Canada currently has the best trade deal with the United States, with roughly 90% of Canada-U.S. trade shielded from President Donald Trump’s tariffs thanks to the Canada-United-States-Mexico Free Trade Agreement (CUSMA).
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He’s not wrong that the CUSMA has shielded Canada from the brunt of Trump’s tariffs. In fact, Canada would be in a deep recession today if such a large portion of cross-border trade weren’t protected by the CUSMA.
JAY GOLDBERG: Canada should be listening to United States trade grievances Back to video
But all of that could change if Trump decides to abandon the trilateral trade agreement, which is up for renegotiation this year.
United States Trade Representative Jamieson Greer said recently that Mexico is well ahead of Canada in negotiations with the United States to renew the trade pact. He has consistently pointed to several trade irritants on the Canadian side that the Trump administration feels are poisoning the relationship.
Supply management a major target
Last week, the office of the USTR released its annual report on foreign trade barriers and the list of complaints the U.S. has about Canada is long. When you drill down into the details, many of the Trump administration’s concerns are more than valid. And these barriers are harming Canadian consumers just as much as they’re harming American exporters.
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Supply management is the Trump administration’s first major target. Canada’s system of supply management, introduced more than 50 years ago, artificially raises the prices of dairy products, eggs and poultry through a complex web of quotas, import restrictions and regulations. This means U.S. exporters have minimal access to the Canadian market. The combination of strict quotas and import restrictions means Canadian consumers pay hundreds of dollars more per year for these products than they would have to otherwise. Scrapping supply management would allow for both increased bilateral trade with the U.S. and lower prices for Canadian consumers.
Next, Greer’s report mentions pharmaceutical pricing practices. In particular, it focuses on Canada’s Patented Medicine Prices Review Board (PMPRB), which sets a maximum price for new patented medicines by comparing a drug’s list price with that of several other countries. A few years ago, the government of then-prime minister Justin Trudeau took the U.S. and Switzerland off the list of comparator nations, which had the effect of reducing the maximum prices the government will pay for new medicines, leaving the U.S. to shoulder more of the innovation cost burden. It’s high time for Canada to accept its fair share of the cost burden of pharmaceutical innovation and that means, at a minimum, putting the U.S. back on the PMPRB’s list of comparator nations.
‘Buy Canadian’ threshold concerning
The USTR report also mentions alcohol. Except for Alberta and Saskatchewan, provincial liquor control boards have removed U.S. alcohol from the Canadian market. While Canada’s provincial politicians claim to have done so as a response to Trump’s tariffs, the reality is that consumers, not the government, should be deciding if they want to boycott buying U.S. alcohol because of the Trump administration’s policies. This is yet another trade irritant that ought to be eliminated.
Another point the USTR makes has to do with the Carney government’s “Buy Canadian” policy, which requires government procurement contracts valued at $25 million or more to prioritize Canadian businesses and materials. The USTR notes that Canada is only in phase one of its “Buy Canadian” policy and that the threshold is expected to be lowered to contracts of $5 million or more. This should be concerning for Canadian taxpayers, because it means that governments will accept more expensive or inferior bids simply because the companies bidding are Canadian. And it raises the risk that the United States could retaliate and deny Canadian companies access to similar contracts in the U.S.
The United States has many more concerns, but these are just some of the highlights.
The bottom line is that Canada is pursuing several protectionist trade policies that threaten the renewal of the CUSMA, an agreement that has kept Canada out of a recession and that virtually every sector of the Canadian economy relies on to gain U.S. market access. If the Carney government doesn’t want to risk the possibility that the trade agreement isn’t renewed altogether, it needs to act to address some of the Americans’ trade grievances. The USTR’s list of concerns should be taken seriously and Canada’s politicians should act to ensure valid U.S. concerns are addressed ahead of high-stakes talks about renewing the CUSMA later this year.
Jay Goldberg is the Canadian affairs manager at the Consumer Choice Center
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