Biden's win signals certain change for trade relations
Confrontational approach will leave with Trump, but don't expect fast action on softwood tariffs, expert says
New Brunswick shouldn't expect a quick end to U.S. tariffs on softwood lumber and other trade action when Joe Biden is sworn in as president, according to a Washington lawyer specializing in international trade.
Yohai Baisburd says Donald Trump's departure from the White House, and the end of his confrontational approach to trade, will change the tone of the relationship with Canada.
But the substance may not shift immediately.
"The softwood lumber dispute is really a commercial dispute between the two industries" in each country, said Baisburd, a partner at the Washington firm of Cassidy Levy Kent who has represented companies, industry groups and governments in trade disputes.
"Yes, they're played out in U.S. government forums, and the Canadian government and the provinces represent Canadian interests in the subsidy cases …. but fundamentally it's a business dispute between the two industries."
Forest NB executive director agrees
Mike Legere, executive director of the industry group Forest NB, agrees with Baisburd.
"We could hope for but would not anticipate any short term solutions to trade issues including softwood lumber as the Biden administration has significant domestic challenges to focus on," he said in an email.
Baisburd said it's more likely that a resolution will be driven by market conditions that lead to negotiations between U.S. and Canadian industries "and not the tone or the tenor of the relationship between the two countries."
Biden secured his election victory on Saturday after days of counting in several battleground states.
In 2017, the Trump administration applied new tariffs on Canadian lumber and eliminated the traditional New Brunswick exemption from those measures, hitting sawmills that export wood across the border with higher costs.
J.D. Irving Ltd. pays 9.38 per cent on its exports to the U.S. while other mill owners pay 20.8 per cent.
The tariffs sprang from a U.S. industry group complaint that predates the Trump administration. In 2016, the organization argued Canadian lumber is unfairly subsidized, allowing it to be sold cheaper in the U.S.
Trump has used belligerent language on international trade, calling Canada "very difficult to deal with" on a range of issues from car manufacturing to the dairy sector.
"They've been very spoiled," he said. "They have been taking advantage of the United States for a long time."
Bulk of province's exports sold to U.S.
Canada depends on the U.S. as its main customer for almost three-quarters of its exports. New Brunswick is even more exposed to shifts in American temperament: in 2019, 88 per cent of provincial exports, worth $13.1 billion, were shipped to the U.S.
"We look forward to a collaborative working relationship and the speedy resolution of outstanding trade issues," Premier Blaine Higgs said in a statement Sunday congratulating Biden.
Mario Thériault, the Moncton-based chair of the Canadian Chamber of Commerce board of directors, said four years of erratic behaviour from Trump have been "very gruelling" for entrepreneurs.
"There's no worse thing for business than uncertainty," he said.
"Businesses prefer stability. They prefer to be able to plan. … They prefer fair trade, so open borders, open deals, and we've had a bit of a struggle with that."
I think he'll move away from the simplistic 'imports are bad, exports are good' and look at more of a comprehensive trade policy.- Yohai Baisburd, Washington trade lawyer
Baisburd predicts Biden will usher in "a more traditional trade policy" that uses existing dispute-resolution mechanisms to deal with issues that create friction.
"I think he'll move away from the simplistic 'imports are bad, exports are good' and look at more of a comprehensive trade policy."
But that may not mean a blank cheque, he warns, given a strong anti-free-trade sentiment among some Democrats.
Biden could leverage Trump's aggressive actions
Baisburd said Trump's aggressive actions will actually leave the president-elect leverage he can use to win trade concessions in return for reverting to a more conventional approach.
"It will be interesting to see if a Biden administration takes advantage of that leverage and uses it to make some incremental deals and take some tangible irritants off the table," Baisburd said.
"Or will it unilaterally disarm and remove some of these [Trump] things, going back to a more traditional posture in terms of international trade policy? In which case you're doing it to generate goodwill without getting something concrete in return.
"For me that's going to be the most interesting thing to look at."
One example is the U.S. participating in the World Trade Organization's appeals tribunal.
The WTO recently ruled that the U.S. was wrong to impose the softwood tariffs on Canada in 2017.
It said the U.S. Commerce Department miscalculated benchmark Canadian timber prices to determine whether producers here were paying adequate stumpage fees to provincial governments.
But the Trump administration swiftly attacked the ruling as unfair and said it would ask a WTO appeal process to overturn the ruling.
However, that appeal body can only function with a full complement of members, and the U.S. has refused to make appointments, effectively preventing it from functioning.
Baisburd said making U.S. appointments and allowing the WTO appeal process to resume is one way Biden could demonstrate good will, but it's an example of where he may seek trade-offs first.
Legere said a Biden commitment to the WTO process would help, "but there remains an America First in his platform so [it will be] interesting to see how he reconciles the two."