Trade war with Canada is 19,000-job gamble for Eastern Washington

July 24, 2018

About $2 billion worth of products cross the U.S.–Canadian border daily, making the two nations each others’ largest trading partner.

An escalating trade war – with tariffs and retaliatory actions – will create hardships for both countries, speakers at the Pacific Northwest Economic Region’s annual summit in Spokane warned Monday.

“A lot of people don’t realize how important trade is to our prosperity,” said Colin Robertson, vice president of the Canadian Global Affairs Institute in Ottawa. “We are friends, we are neighbors, but mostly we are allies. … We’re self-inflicting wounds on ourselves that affect our competitiveness.”

Consideration of the future of the North American Free Trade Agreement kicked off the four-day summit, which brings together leaders from five states and five provinces and territories to discuss issues of regional interest and concern.

Trade with Canada might sound like an esoteric topic, but for Washington, it means 225,000 jobs and $8 billion annually in exports, said Brandon Lee, Canada’s counsel general in Seattle. In Eastern Washington’s 5th Congressional District, Canadian exports are responsible for 19,000 jobs and $740 million worth of exports.

Canada promised to impose “dollar for dollar” tariffs on U.S. steel and aluminum after the United States imposed a 25 percent tariff on Canadian steel and a 10 percent tariff on aluminum.

As a result, about $166 million in Washington exports is facing 25 percent counter-duties, according to the Canadian consulate. Another $463 million in exports is facing 10 percent countervailing duties.

Caught in the cross-hairs are exports such as roasted coffee beans, plywood, paper, herbicides, motorboats, fruits and mineral water.

“When something catches fire, you can usually count on good relationships between the president and prime minister to fix it,” said Chris Sands, director of the Center for Canadian Studies at the Johns Hopkins School of Advanced International Studies in Washington, D.C. “Normally, they stay above the fray.”

After President Donald Trump characterized Prime Minister Justin Trudeau as “meek and mild” after the G7 Summit in Quebec, and Trudeau fired back that Canada won’t be pushed around on trade, the moment seems “a lot scarier,” he said.

Sands credited social media for playing a role. In the past, the “macho, locker room talk” stayed behind the scenes during trade negotiations, he said. Now, it’s out on twitter.

Business leaders are eager to reach a resolution on NAFTA, and, under optimistic scenarios, the Trump administration would reach an agreement in principle that would lift the steel and aluminum tariffs in the next six to eight weeks, the speakers said.

U.S. manufacturers managed to stockpile some steel and aluminum, but the supplies will run out, said Dan Ujzco, an international trade and customs lawyer who specializes in U.S.-Canadian matters.

“The urgency is here,” he said. “We’ll see insolvencies and bankruptcies. Little suppliers will get hurt first.”

If tariffs progress to the auto industry, consumers will pay sharply higher prices, the speakers said.

“The average car constructed in North America crosses the border seven times,” Robertson said. “For a car assembled in Canada, about 60 percent of the parts come from the U.S. If you start tracking all that, the price goes up. The North American consumer starts to say, ‘Maybe I should buy an Asian car.’ ”

Several speakers suggested that states and provinces work out their own agreements, bypassing the acrimony at the national level.

NAFTA represents “almost 30 years of free trade. It means we build things together,” said Lee, Canada’s counsel general in Seattle.

“Uncertainty (over NAFTA) has hurt the Canadian dollar and the Mexican peso, and it’s starting to affect us as well,” Sands said.

About 170 Canadians are in Spokane this week for the summit, which continues through Thursday at the Davenport Grand Hotel. In all, more than 600 politicians, policy analysts and business leaders are attending the conference, discussing topics such as renegotiation of the Columbia River Treaty, carbon policy, election cybersecurity and border crossings.

“The strength of our relationship is the people to people relationships, and that has not changed,” Robertson said.

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