The Trump administration is preparing a new plan to combat the flow of counterfeit goods entering the U.S. market, reviving a major irritant with Canada at a time when the entire trading relationship between the two countries is under close scrutiny in Washington.
One of President Donald Trump's most recent executive orders – signed on Friday – calls on senior members of his cabinet to produce a plan within 90 days that addresses the issue.
The Organization for Economic Co-operation and Development recently identified Canada as a leading source of counterfeit technology products. While China and Hong Kong are by far the world's top sources for fake information and communication technology products, the OECD placed Canada among the top five.
Read more: Border tax may be more harmful to U.S. economy than Canada's: Morneau
Smartphones, video games and other electronics are examples of counterfeit products entering the United States, according to the study released last week from the OECD.
While the President's executive order did not single out other countries, a separate annual report released last week by the Office of the U.S. Trade Representative revealed the Trump administration has maintained past concerns with Canada over screening for illegal goods.
The U.S. report notes that while Canada passed the Combating Counterfeit Products Act on Dec. 9, 2014, the bill fell short of addressing U.S. concerns.
"The United States is disappointed that Canada did not amend this legislation to allow for inspection [to search for] in-transit counterfeit trademark goods and pirated copyright goods entering Canada destined for the United States," the report states, repeating a view that was expressed repeatedly to Canada when Barack Obama was president.
Major policy changes in the United States that could affect Canadian trade continue to be of top concern for Canadian business and government leaders. As no clear plan has yet emerged from Washington on trade or tax reform, Canada is now inserting itself into the domestic political debate.
On Monday, Finance Minister Bill Morneau delivered a speech to a World Economic Forum event in New York that expressed Canada's strong opposition to a border tax, a complex proposal that is the subject of intense negotiation among Republicans as the White House and Congress work behind the scenes on a tax-reform plan.
"We believe a border tax is not in the best interest of American or Canadian families – in fact, it would make us poorer, by imposing extra costs on U.S. companies and disrupting trade at the border," said Mr. Morneau, who had previously declined to comment on the issue. His remarks indicate an escalation of public concern on the issue from the Liberal government.
Whether it is through tax reform, a renegotiation of the North American free-trade agreement or executive orders, several avenues for policy changes could affect the Canada-U.S. relationship.
Counterfeit goods was a particularly thorny issue in recent years.
Dan Ujczo, an Ohio-based international trade and customs lawyer with Dickinson Wright who specializes in Canada-U.S. relations, said some strong voices in Congress share the White House's frustration with Canada's resistance to the U.S. request that it screen shipments as closely as it does people.
"My recommendation for the Trudeau government would be to get these things off the table now," he said, suggesting an increased budget for the Canada Border Services Agency for staff and more inspections of shipping containers arriving from overseas would help address U.S. concerns. "It's just an inconsistent position from Canada and I don't think the U.S. has ever really got its mind around it."
John Babcock, a spokesman for Global Affairs Canada, said the new administration has not directly raised the issue of intellectual property rights with Canadian officials.
"We recognize that a strong intellectual property system in Canada is key to encouraging innovation, attracting investment, and driving the economy," he said in a statement.
In his first public speech in 2014 to a Canadian audience as U.S. ambassador, Bruce Heyman called on Ottawa to expand its laws so its officials could prevent illegal goods from entering the United States via Canada.
The trade minister at the time, Conservative James Moore, strongly rejected the idea, stating that Canada had no intention of acting as a customs agent for the United States.
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