Lawrence Herman, a former Canadian diplomat, is counsel at Herman & Associates and a senior fellow of the C.D. Howe Institute in Toronto.
Whew. Canadians are showing unalloyed relief with the results of the U.S. election, ending four year’s worth of chaos, unpredictability and antagonism under President Donald Trump’s “America First” agenda. The tone of the bilateral relationship will change 180 degrees under a Joe Biden presidency.
Yet when it comes to trade, there are some hard facts that give reason to temper some of this enthusiasm. Here is a short list of items – some good, some not so good – to consider in the days ahead.
Support for multilateralism
The Biden administration will reverse Mr. Trump’s disdain and disregard for the World Trade Organization and the multilateral system generally.
We can look to the United States removing its veto over appointments to the WTO Appellate Body – which adjudicates trade disputes – and the selection of the WTO’s next director-general, re-engaging support for the WTO as an institution. This will be of benefit to Canada, given our dependence on a healthy and well-functioning multilateral trading system, including its dispute-settlement process.
It is possible that Mr. Biden will look seriously at joining the Trans-Pacific Partnership trade deal. However, should the U.S. join the TPP down the road, it will dilute the benefits of the agreement for Canada. Something to keep in mind.
While Mr. Biden and his Democratic team are committed to open trade, there is a strong current of protectionism within the party, best exemplified by Bernie Sanders and Elizabeth Warren, and supported by organized labour. As well, the Republicans, once wedded to free-trade principles, have pivoted toward protectionist policies under Mr. Trump. When it comes to China, both parties are in tune on using trade weapons such as tariffs to curb Chinese commercial aggression and disregard for the WTO rules. The U.S. trade war with China will not likely diminish under Mr. Biden and Canada will not be shielded from its effects.
Getting the team in place
Even when sworn in on Jan. 20, 2021, it will take time for Mr. Biden to get his trade team in place. Whoever Mr. Biden names as the new U.S. Trade Representative (USTR) will have to be confirmed by the Senate, which is likely to be Republican-controlled.
While Senate confirmations have occurred quickly when the president and the Senate were of the same party, when parties are different, USTR confirmation can delayed by unbridled partisanship, long hearings and intense grilling of candidates. The Senate must confirm deputy USTRs as well as a host of other senior officials that work on trade policy.
Given the intense politics on Capitol Hill, this means the full Biden trade team and the unfolding of his administration’s trade policy could take several months after he takes office. Canada has a trade agreement with the U.S. and a solid framework for business relations, so this might not have immediately negative consequences. However, it could be well into 2021 before the full scope of Mr. Biden’s trade policies are up and running.
Less use of executive action
The U.S. Constitution gives Congress responsibility for international trade. Over time, however, Congress has delegated a considerable amount of this authority to the president. Witness Mr. Trump’s use of executive orders to increase tariffs on Chinese, European and, as we have seen, Canadian imports, all under the guise of national security. We can expect Mr. Biden to reject this kind of unhinged unilateralism. When it comes to China, however, given the strong bipartisan support for being unyieldingly tough, the use of executive authority will continue.
During the campaign, Mr. Biden pledged to aggressively expand use of “Buy American,” preferential domestic policies much favoured by Mr. Trump. These proposals will be pursued in the coming four years with strong support in both parties, with obvious implications for Canadian suppliers into the U.S. market.
During the North American free-trade agreement renegotiations, Canada and the U.S. agreed that government procurement would be governed under the WTO multilateral umbrella. But there are huge exemptions in the WTO Agreement, allowing a Biden administration to expand “Buy American” preferences. And even where WTO rules are breached, until its dispute-resolution system is restored, no Canadian WTO complaint can be adjudicated.
Trade remedy actions will continue
It is impossible to discount the impact of iron-clad, bipartisan support of strong U.S. trade remedy laws, meaning the ability to slap anti-dumping and countervailing duties and, when desired, other kinds of import restrictions. Ostensibly based on WTO rules, the U.S. has created its own complex and unforgiving trade remedy system – laws that have become sacrosanct to both parties.
These trade actions are driven by private industry, which will continue to have the undiminished right to file complaints targeting imports from any source. It means Canadian exports could be as much in the crosshairs as those of any other country, even under the new United States-Mexico-Canada Agreement and even with the Democrats in control of the trade levers.
Green policies and Canadian oil
Mr. Biden is committed to reducing carbon emissions, a position much approved of by the Trudeau government. Border tax adjustments will be a difficult issue – but the critical one for Canada will be the fate of Keystone XL pipeline.
While no doubt better times are ahead, there are these troublesome matters that should not be overlooked, even as Canadians breathe a sigh of relief that the Trump era is in its twilight weeks.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.