Canada's Trade Policy Hypocrisy: A Threat to the Rules-Based System

Strategic Insights -

Canada's imposition of tariffs on Chinese electric vehicles and steel imports from China has been widely criticized, as it directly violates World Trade Organization (WTO) rules. The Trudeau government's decision to follow the United States, which has arbitrarily imposed tariffs on all its major trading partners, has been described as a strategic error. By maintaining WTO-illegal tariffs, Canada is weakening the very rules-based system it claims to defend, leaving it vulnerable to charges of hypocrisy and double standards.

Key Takeaways:

  • Canada's imposition of 100-per-cent tariff on Chinese electric vehicles and 25-per-cent tariff on steel and aluminum imports from China is in direct violation of WTO rules, which prohibit discrimination and the arbitrary imposition of tariffs.
  • The Trudeau government's decision to follow the United States' trade policies has been described as a strategic error, as it has not led to the expected benefits and has instead put Canada at risk of a WTO defeat.
  • The United States has disabled the WTO's Appellate Body, which acts as a supreme court for global trade, allowing it to break the rules with impunity.
  • Canada has worked with a group of 50-plus countries to create the Multi-Party Interim Appeal Arbitration Arrangement (MPIA), a de facto Appellate Body that ensures WTO rules remain enforceable for participating states.
  • The European Union has followed WTO law and opened a countervailing duty (CVD) investigation against Chinese electric vehicles, which has led to the imposition of a 35-per-cent duty on Chinese EVs.
  • The EU's investigation is a more credible and legitimate option that respects global trade rules, and Canada's new government should withdraw the current tariffs and follow the European approach.

Statistics:

  • $3.7 billion: the value of Canadian canola, pork, and seafood imports on which China has imposed countertariffs.
  • 35 per cent: the duty imposed by the EU on Chinese electric vehicles as part of a countervailing duty investigation.
  • 50-plus: the number of countries that have joined the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) with Canada.

Sources:

  • Hopewell, K., & Margulis, M. (2023). Canada's double standard on trade. Globe and Mail.
  • WTO. (n.d.). Rules and Regulations. World Trade Organization.
  • European Union. (2020). Countervailing Duty Investigation into Certain Imports of Electric Vehicles from China.
  • MPIA. (n.d.). About MPIA. Multi-Party Interim Appeal Arbitration Arrangement.