President Trump Threatens the "Ruination" of Canada and other Trading Partners

It is one thing to call NAFTA, falsely, the worst trade deal in the world. We have heard this before, and have now heard it again from President Trump in a speech on September 7 in North Dakota, along with its usual companion piece, the allegation that Canada has been taking unfair advantage of the most powerful country in the world.

Such statements are maddening but demonstrably incorrect. Both Canadian and United States statistics show total trade between the two countries to be always growing, in mutual benefit to both economies. That trade is also (not that a trade surplus or trade deficit would mean that the trade is not beneficial to both sides) strikingly balanced.

It is quite another, though, for one trading partner to declare to the other that concessions must be made in order to avoid economic warfare. Yet, it is difficult to interpret otherwise the additional statements made on September 7.

The President made clear that he was prepared to use presidential powers to apply a 20% tariff on cars in order to obtain trade concessions in areas having nothing to do with cars, not only in a NAFTA context but in relation to any trading partner which sends cars to the United States.

This clearly undresses the camouflage argument advanced by the White House that the United States must consider car tariffs, under section 232 of the Trade Expansion Act (yes, "Expansion") of 1962 because that country's national security is threatened by excessive imports of cars. More than this, it can only be seen by trading partners as the death, at least in negotiations with the United States, of the long-standing and respectful way of negotiating trade treaties. Instead of each country offering or seeking concession A in exchange for concession B, a process which leads to mutual liberalization of trade, we are now apparently in a world of demanding concession A in order to avoid the trade-harming measure C.

Furthermore, it appears to be irrelevant to President Trump's view of this negotiating tactic whether the trade-harming measure is consistent or not with United States' commitments under the WTO agreements.

President Trump went even further, however. “In some countries, including Canada," he said, "a tax on cars would be the ruination of the country. That’s how big it is. The ruination of the country." This is not merely the threat of harming trade in order to force a trading concession from the smaller economy. It is the threat, twice said, of "ruination" of the smaller economy if it does not deliver the concession, gratis, free of any mutuality from the larger.

All those who have seen the benefit of decades of solid growth in international trade, and of the perhaps slow but steady reduction of trade barriers, must hope that these statements are but a negotiator's bluster, that the threat is a matter more of tone and style than of substance, and that the institutional and legislative bodies of the United States will see what the United States has known since at least the Second World War: progress has always come from principled leadership, not from threats of economic warfare.

 

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