The following is written by Danielle Goldfarb, Associate Director of International Trade and Investment Centre, Conference Board of Canada.
To the trade-dependent Canadian eye, worrisome signs of U.S. protectionism appear to be everywhere. This week, Obama’s pick for U.S. Trade Representative said that he will vigorously enforce U.S. trade rights. This follows his announcement a few weeks ago that Canada, for the first time, is on his department’s “priority watch list”, reflecting concern about inadequate copyright reform and weak border enforcement.
Add to this the new head of the U.S. Department of Homeland Security talking tough on the Canada-U.S. border, requirements to “Buy American” in the stimulus package, and new legislation requiring country of origin labels on meat – which protects American beef and pork farmers from Canadian competition. Moreover, the U.S. is not the only one threatening protectionist action: a new Brookings Institution study shows that countries have increased their legal actions against imports by 19 per cent in the first quarter of 2009.
Our country has long depended on highly integrated cross-border supply chains to boost our living standards. Even before the current economic crisis, the Canada-U.S. border was becoming thicker and cross-border supply chains were shrinking. So Canadians should be worried if we are indeed moving away from free trade, particularly with the U.S. Protectionism could make Canada a much less attractive place to buy inputs, goods or services from, and ultimately invest in. That would put a serious crimp in our living standards.
While these concerns are legitimate, “the sky is not falling”, argues Marc Busch of Georgetown University in a new piece for the Conference Board of Canada’s International Trade and Investment Centre. Yes, there is still a lack of clarity concerning Obama’s vision for trade, and Congress will still “flirt with protectionism”. In a roundabout way, however, Washington’s new emphasis on enforcing trade agreements will in fact make open markets more likely – or at least closing them less likely.
How? Busch argues that as Obama emphasizes enforcement, many trade sceptics in Congress will have cover to support the President on pro-trade policies, enabling “the administration to chart a course toward rebuilding America’s confidence in open markets”. And, he argues, the beauty of enforcement is that if others must keep up with their obligations, so too must the U.S. For example, U.S. country-of-origin labels for meat are now subject to legal scrutiny at the WTO.
Moreover, things could be a lot worse in the face of a very trade-sceptical U.S. public in the midst of an economic crisis. But Obama’s initial reaction to including “Buy American” provisions in the stimulus package was to ensure that they did not run afoul of the U.S.’ WTO obligations. This is important: the U.S. does not usually say it will place international trade obligations ahead of domestic goals. Obama and his Trade Representative have also made a point of warning of the dangers of protectionism.
Despite this positive spin, Canada must be vigilant in ensuring its access to the U.S. market is not compromised. Industry Minister Tony Clement’s lobbying push in Washington … is important. To be most effective, however, Canada must make its case directly to American industrial constituents hurt by U.S. protectionism. This is the most certain way to influence Congress and protect Canadian interests – and living standards.
